The bathroom is one of the most valuable rooms in your house. The only other room that even comes close is the kitchen. The perceived size of the room can dramatically affect the value and comfort of the area.
As a Contractor, I have seen a multitude of baths transformed from mediocre and barely functional, to bright and inspiring spaces. How you do it depends on your desired approach, and ultimately your budget.
I generally start a bath reno by choosing the flooring and paint colors. The style of flooring is an important consideration. If you have a narrow bathroom, I would advise a 12"x12" tile, set on a diagonal, or "diamond" pattern. Choose a light colored, slightly textured tile for the best results. If the room is somewhat square, a 12"x24" tile, set in a brick pattern will help elongate the room. When selecting the grout color, try to match it as closely to the tile as possible. The uniformity helps the room look bigger.
The paint color for the walls should be complimentary to the floor, a contrasting color tends to close the room in too much. For the trim, I generally recommend that a very light color be applied, either a white, or a very gently tinted white base. The ceiling should almost always be white, to give the perception of added height.
The trim selection is also really important. For a small bath, use narrower trim and baseboard. This helps by making the walls and floor look proportionally larger, while still providing a nice finished appearance.
Whenever there is a frosted glass or textured glass window in a washroom, I like to replace it with clear glass, and a simple window covering, like a light colored panel curtain. Clear glass lets more light in, and brighter rooms look bigger. For privacy, simply close the curtain.
If you are replacing the fixtures, go with white. It is timeless, and the least intrusive. For optimum spacial perception, go with a pedestal sink. The small footprint allows for more exposed wall, which makes the room look larger.
Generally, I recommend a full height tub surround. If you are tiling, either a plain white looks good, or you can use the 12"x24" tile, set vertically, to give the illusion of height. If you are using a plastic tub surround, a one piece unit is best.
If your shower has glass doors, clear glass will have the best effect. Frosted, patterned, or opaque doors close off the room, much like there is another wall. If you are using a shower curtain, choose one that compliments the walls, and leave it pulled to the side when not in use. A rope-type tassel can make this look more appealing.
The final note on bathrooms- the door. I like a french door with frosted glass. They allow light to pass through, and still provide the privacy required.