What was done:
1) New flooring was a must. Since we plan on completely renovating the bathroom in the hopefully near future we just put stick down tiles in here to follow with what we did in the hallway and kitchen.
2) The ugliest part of the bathroom was the wallpaper, so we did the unthinkable and painted the crappy wallpaper. It was literally our only option at the time without having to tear down the walls. My other idea that I may still do is to get the paintable textured wallpaper and install it to hide the woodpaneling lines. But wallpaper in a bathroom is not the best idea... the moisture from the shower tends to peel wallpaper off. Mind you thats if it is on drywall.... nothing gets it off wood panelling!!!
3) We built a radiator box. See next post for details on the radiator box as its a story in itself!!!