<p>Some potential thoughts:
-Paint a bright fun color on a wall or two. A bright color for the entire space could be too much, but an accent wall will divert attention from the concrete block.
-Paint the ceiling AND any pipes or ductwork on the ceiling, a dark color (like they do in old warehouses, restaurants, or lofts, to make it blend and become a background).
-Selectively drywall an accent wall placed slightly in front of a concrete block wall. It softens the room, adds visual interest, and can hide selective piping or even storage if space is available. You’ll sometimes see this method used in contemporary office spaces in old warehouse buildings. The old brick, stone, or concrete is exposed, but framed or slightly hidden by a drywall partition that can also house new electric wiring. An accent wall can also become the focal point for a flat screen TV.</p>
<p>I personally would not plaster over the concrete block. Given the age of the house, and probably lack of waterproofing on the outside, the block can still absorb moisture from the exterior.</p>