In this room, I have placed a Queen sized bed centered in the room under the window. Each of these tables has a small reading lamp on them. Depending on your nieces and nephews ages, you may want to eliminate the lamps and have a wall mounted light near the bed.
Younger children tend to knock over table lamps easily.
The bed has the toile pillow cover on one pillow and the barkcloth on another. For the bedspread, I think that a soft extremely pale yellow in a chenille or cotton would look great with your wall paint. If you go with a pattern on the bedspread, I would keep in light and simple. An aged look in the fabric would go well in this room. At the foot of the bed is a chest that can store toys, extra blankets, etc.