Oh that's so smart, Chris!  I knew people would say that I needed to start with something that I love rather than working with the carpet that I hate.  I'll probably end up laying an area rug down that will cover most of it, but bedding is the best way to start.

Any suggestions for unique modern or ethnic bedding (other than Jonathan Adler, Dwell, Marimekko, West Elm, Pottery Barn)?

If your photo is correcly conveys colors, its important to note that your gray is more of a "warm" gray (i.e. brownish) than a cool gray (like purplish). This means that if you choose a cool color scheme -blues and greens- then the carpet will seem more brown. If you do red and oranges and rich brown, the carpet will seem more of a cool color.

Personally, I'd find bed clothes that you absolutely love, and let them determine you wall color. If they're multicolored, look for the second or third most represented color, and try that on the walls.

I like the blues but I'm leaving an apartment that used all blues so I was trying for something different (I do like that Sapphireberry color though!) I just uploaded a photo to the post (sorry it's a little crooked) but you'll get the idea.  Everything will be new (no artwork etc.) so I can go anywhere with this as long as the color is not too dark (as per the landlord's request).

I'm looking to spend 1-2K on the entire room (including a new mattress as we have a loft bed now).

Having gray walls will accentuate your carpeting, which--it sounds like--you don't care for. I'd go with your instincts and lean toward blue. Maybe something watery/sea-side-y. Then, on your accents, you could go tone-on-tone. For this kind of thing, I'd find a paint color in the middle to lighter tones of a paint strip for the walls, and then use the deep tones on the same strip to find the accents. So, for example, let's say you pick something like Sapphireberry--a Benjamin Moore color--then you could accent it with any of those darker hues--like Blueberry or Down Pour Blue.