We recently built a stage in our children's garden and on the fence behind it we painted curtains. It looks really cute and helps to define the area. Maybe something like that would work for you?

Any music/instrument store will sell guitar hooks for the wall. We have 3 hooks in our living/music room for our 3 yr. old's guitars, they work great and they're simple.

Depending on how much space you're talking about, you could do a lot with a curtain backdrop hanging on the wall, a rug (maybe a half-circle to look like a round stage), and some novelty lighting. A rug (or a cut carpet scrap) would really define the space. I have a 2-year-old, and I think keeping it simple is a good idea.

This is what the previous poster is talking about -

http://www.zzounds.com/item--SSWCC01

I would also say maybe some kind of mirror so he can see himself air-guitar. :)

I know this isn't what you were asking, but I still vote for building a tiny "actual" stage - just a wooden platform maybe 2 or 3" off the ground, that could be leaned up against the wall if needed.

When my friend's little boy was learning to sleep in a low toddler bed that was made like a platform, not using slats or needing a box spring, he recommissioned it as his stage. It was the cutest thing.