We replaced the original Formica-topped cabinet with a piece of furniture we modified to look like a built-in unit and later topped with granite to match the kitchen. We also enclosed the open storage nook with new cabinetry to sit above our wine fridge, which we very happily promoted from the basement. The final project was installing custom shelving for our glassware. And as always, we did lots of repair work to the walls, added new trim/molding and paint.
We got pretty creative and managed to complete this space very cost effectively: The cabinet was from IKEA (on sale to boot!); due to the unusual size of the storage nook, we were forced to get custom cabinetry but managed to find a place that builds custom cabinets by machine instead of by hand, which saved a bundle; and our slab of granite was recycled (a remnant from another kitchen) and was waaaay less expensive and a green solution, which made us feel nice.
Check out pics from the project here