What Happened In Here?

Several weeks ago, the topic of organizing craft rooms came up at knitting group. I am embarrassed to admit that mine is a wreck. Now that summer break is upon us, I'm looking for help in organizing this mess. I find that I'm having a hard time deciding what needs to stay and what needs to go. I have a couple of ideas, but feel like this is beyond my abilities.

I know that I want to replace the paneling (blech), put up drywall, & a fresh coat of paint. I'm also thinking of getting rid of the the table (while it works for me, it takes up too much space in the wrong kind of way) and replace it with a counter top on the opposite wall. This would give me under the counter storage. Maybe some pegboard above it to hold sewing tools, etc.?

Any suggestions would be appreciated. I prefer to do using recycled materials but make it look like a room meant for me and not a 'former play room with glow in the dark wallpaper converted into a craft/slop room'.

Entrance to 'the cave'

corner to the left of the sewing table

I'm standing in the doorway and taking a pic of the opposite corner.
Hubby piled the things on the floor for me,
they weren't originally there. Grrr.

This is the corner/wall that is on the doorway wall.
I know the smaller bookshelf & it's contents
are unnecessary as I only use the top of it.
There are a couple of my hubbys science things in there that can go too.

I'm a bit ashamed to post these pictures. It really makes me look like a slob. The rest of the house isn't like this. It seems to be a space that stuff gets thrown when company comes over and I really need it to be a space where I can work and not feel like I'm teetering on piles. Please don't judge. My name is Seesaw & I have a problem...

Any of my friends up for the challenge?