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*sigh* That's what I get for typing a long message, you snuck in while I was writing my essay

Okay, it looks like you've got jpeg issues to me. Low funky lighting and not the highest quality file format are giving you some pretty common consumer level digital camera problems.

Here's what I did... I gaussian blurred the blue channel about 2 pixels to knock the edge off the major jpegies on that channel. Then I used a light blurring combined with a dust & scratches and a median noise to lighten the contrast on the distortion but still keep the lines from fuzzing out too much. Then I went back and normalized the midtones a little with a simple levels adjustment (very simple one actually, just clicked the midtones on the wall and poof, no more red). A little over saturated for me, so a minor desat with hue/sat adjustment. Then some curves just to bring the shadows out a little since there was a LOT of contrast (direct flash lighting would be my guess?).

This seemed to fix most of the issues to what looks like an acceptable level. It kind of depends what you want to do with the photo. You also need to do any other cleanup after that... some red-eye was removed, but an actual red-eye technique would benefit. Also, any other cloning or whatever I would do at this point after you've balanced the colors, so you don't have to go back and redo it.

Hope that helps.