Definitely get a great curtain, unless you're OCD about your clothing and whatnot.

If you like a clean look the Ikea Kvartal panel system would work nicely. Choose your panels, then choose a paint color to complement them. With a room that small, a dark color combined with effective lighting can enhance the cozy factor. Consider it.

I used a Behr color called Reflecting Pool (light blue) for a small and dark room, and I swear by it. It brightened it up so much. curtain on a track system could be cool for the closet for a more modern feel than a traditional rod and rings...

Depends on what you like, light colors work better since you are worried about the light. I would paint it a light pale green. Get curtains for your closet, look for a better shelving system that would work for you. Since the room is tiny I would not put much in the room, make it more zen like.

The color of the room isn't the issue:
You need lighting in that space - and that one little lamp by the bed isn't cutting it.

Lamps: They're your friends.

And Yes, you need something to cover that closet - A hospital track w/ floor-ceiling curtains would be perfect.

I like the aqua -- it's close to the color I picked for my room. It looks fresh and lovely with a lot of white curtains and some crystal and metallics (like picture and mirror frames). But if you aren't fond of the color you aren't.

I do think you should cover your closet -- if you have an IKEA within reach, they have some flat panel curtains that you could install that would function a bit like sliding doors and not take up space into the room. I'd hang something fairly large on the wall over the bed: art, tapestry, mirror, something light...

Apart from that I can't see enough of the layout of the room to have other suggestions.

A great way to add color and add a little something something is wallpaper...but not on the walls. You can paint the walls the yellow you like (or plain white) and find a cool wallpaper to put on the CEILING! It definitely gives any room that "wow" factor! Check out the link below to see what I mean...

http://grubbygirls.wordpress.com/2010/04/20/to-the-window-to-the-wall-paper/

I like the aqua, but it's not for everyone. I would paint the room a light powder blue, or maybe a really pale, fresh yellow. Get a big (full length ) Mirror and place it on the wall directly across from the window. Ikea has a really nice framed one for $100, or you could just get a couple of 10-20 dollar ones for the same effect.

And I would leave the closet open, but I'm meticulous about my clothes being perfectly organized. I think solid curtains over closets can look kind of tacky, but a white, sheer curtain with a pretty texture pattern could look pretty and light, while covering the clutter.

If you wallpaper a ceiling, make sure you have two ladders and three people! Or more! Wet (i.e. heavy) wallpaper gravity = potential tears. Another thought: If you can't afford an IKEA-like track/panel system but like the look of flat panels of fabric, consider buying a roll of sticky-backed Velcro tape and adhering it to the top of that closet unit, then secure fabric to the Velcro.

I would also add clip-on lights to the headboard,
or wall mounted lights, as far as you space
issue is concerned. You can then have small
nightstands. And please add lightweight or sheer
curtains to the closet!

You know, all-white is a cliche, but it really works in a dark space.

But I do agree about adding light sources. We installed wall-mounted sconces, and they are a HUGE help.

My bedroom is tiny and so I chose a blue/grey color and got a very light bedspread (I initially had a Merimekki white/silver pattern from crate and barrel, and now I have a white/lightblue/green floral from calvin klein).

I have found that even with small spaces, light colors dont actually do that much, especially when you dont have a lot of light. So I think an intimate color makes the room more interesting.

I'm with Dupont5. In small bedroom spaces, a mid-tone is my favorite, say - milk choc or teal or any other mid-tone. Then spike it up with white and some special throw pillows. You could then go with white texture or an abstract print for the closet cover-up. I have to temper my comment with the fact that bedroom stuff is the only thing that goes on in that room...no TV, no reading, etc. A caramel wall color would be nice, too.