I too have a townhouse with a very small kitchen. It is very closed in. When we were buying this place we fell in love with everything about it except the kitchen, I was sure that I would hate it. Well guess what, I ended up loving a small kitchen, I have adapted it to work quite well.
We replaced the stove and fridge, I also installed an over the range microwave, they had the original almond colored appliances and they had seen better days. The microwave was a great choice in a small kitchen! I would like to replace the cabinet doors and drawer fronts. The cabinets are nice plain solid oak boxes so they are sturdy. I want new counter tops as well. Those will come in time. I am standing in one doorway and there is another to the right, making it feel not so claustrophobic.
I have always wanted an equipment pantry, I hate having to search cabinets for pots and pans. There was a coat closet directly across from the kitchen, I added wire shelving and some cube shelving. On the left, you can't see it, but there are more shallow shelves for canned goods, pasta, rice and such. I used wire between two of the shelves to hold up the baking pans, they just slide right in.
This is my little baking corner. When standing here, there is a smaller pantry with all of my baking supplies right behind me.
Here is the smaller pantry, one built with the house. I use it for baking supplies, snacks and cereal. I like to keep small things corralled so I don't have to go digging for them. I got some nice containers with snap in reusable labels (just erase the pencil) to keep cornmeal, brown sugar, cocoa, powdered sugar and such. Keeps them neat and I can write the brand name and expiration date on them.
Well, that's my little kitchen.