Very nice job!
I vote tiles, though I understand wallpaper or paint is less expensive.
Some Small Space Ideas
Haba Play Cooker, Made in Germany, Solid Hardwood Around $40 http://www.amazon.com/Haba-1596-Wooden-Play-Cooker/dp/B0002HYDNG
The Little Kitchen, Etsy Mama Made, Soldi Hardwood Around $75 http://www.ohdeedoh.com/ohdeedoh/toys-toddler/the-little-kitchen-by-mama-made-them-128644
Play Kitchen Play Mat DIY http://www.etsy.com/listing/42058059/roll-up-kitchen-play-mat-custom-orders
Just thought I would add that we opened the Little Kitchen I linked above from etsy this morning. Really well made and the kids love. Reasonable price for the quality. Full size top but doesn't require floorspace. And it fits into our Ikea Billy shelves that store most of our playthings.
I made a play kitchen with 2 free, old cabinets. one upright, spray painted white for the fridge, and one half cupboard with 2 doors (like the kind that go over the stove) I removed and turned the hinges on one door, so it could open like an oven, and put a wire shelf rack/divide from the thrift store for the 'wire oven rack' and the other side is just 'storage'. I cut a rectangle hole for a little plastic tub I had for the sink, and got an old bathroom fixture from my parents for the sink faucet. I glued CDs upside down for the burners. Totally cheap and cute.
We have the stove and sink from this one: http://www.duketoys.nl/complete-houten-keuken-gekleurd-p-586.html and DS loves it. It is in his room and he plays with it a lot. We also have wooden fruit, veggies and meat that can be cut.