I would paint the ceiling flat as it looks much better and you are not going to be washing ceilings anyway. The color can be either a white or the same off white as your walls. The finish on the walls in the living room depends on the amount of traffic and the use of the room. If it is a high traffic room you will want to use satin/eggshell on the walls and if not go with flat, but be sure when you go to the paint store get the premium paint as it the best value for your dollar.

Hope this helps out.