Closet studio storage-- this is similar to what I want to do with my office/craft room. Remove the closet doors that slide and put all the supplies and things in there with some nice storage/organization setup.
Don't just paint over your problems (that won't fix anything). Grab some spackle and a plastic knife to even out holes on your corner or dents in your wall — then add paint on top of your smooth-as-can-be wall. Get the tutorial at Behind the Studio