I thnk this is do-able with strips of plywood (probably 1/2") cut to desired width and glued and nailed to wall. Separate strips with nail spacers. Add simple crown and corner moldings and also high baseboards to add that vintage cottage feel.

Modern Wall Panels | Wood Paneling Ideas | HouseLogic Remodeling Tips

Before & After -- outdated paneled walls to FABulous space. http://www.betterafter.net/2012/12/cottage-geez.html?m=1 More

neutrals | slipcovered chair

Arty Crafty Kids - Art - Art Ideas for Kids - Autumn Handprint Tree

Look what these children made with just sticks and leaves! What a great way to take creativity outdoors.

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A colorful family tree

DIY and crafts idea | DIY and Crafts photos

This could be modified into a felt sheet and included in a box. shapes game for toddlers