Interior Designer's trick for small windows - mount a mirror lengthwise under the window, then hang floor length window panels from above the window. Place a lamp in the middle of the dresser to camouflage the mirror and help integrate it with the window above.
How to Replace an Existing Window With a Garden Window
This is the perfect place to put a pull out bed! I always look at those beds and thing they're impractical because it's too hard to leave all of the open floorspace needed for one but I'd happily do it for this library/reading space.