I've been lurking for a bit, but this will be my first post. I'm a bit of an automotive frugality champion in some ways (perhaps I need to "share my badassity") , but weak in others (my hobby is racing cars). Some tips for this particular scenario:
1) The mileage on your car is not great**. A Prius will get
40-50mpg avg depending on the generation you buy and of course your driving style. If you made a fairly lateral move to a Prius, you could save quite a bit of money over the next 65K miles you intend to keep the car for. A Civic Hybrid and Insight will also return excellent mileage and as a bonus can be found requiring battery repair. The battery repair is easy to DIY and can enable you to pick one up for quite little. Maybe something to consider after cleaning the car the best you can.
**On a related note, you should track your fuel mileage. Fuelly.com is what I use, but there are numerous options out there. You can compare your mileage to others here:
http://www.fuelly.com/car/kia/spectra If yours is significantly higher... great. If its lower, you may need some maintenance, you may need to adjust your driving style, or you may have a commute that is particularly bad for fuel economy (another reason for a hybrid - regenerative braking really does wonders for these commutes).
2) This is an excellent website showing how to paint a car for $50:
http://www.rickwrench.com/index79master.htm?http://www.rickwrench.com/50dollarpaint.html There are many other threads on automotive forums with details on this... just search "$50 paint job" Paying for a paint job is likely not worth it for this car - you'll never recover the investment. Better to take a loss when you eventually sell it/trade it.
3) I don't know what to do about the seats, but I would recommend searching for a used set on some automotive forums/ebay, or even just the covers. The covers can be removed from the seats and replaced - you don't need a whole new seat. Carpet can be pulled from the car rather easily if you remove the seats first. Once its out, you may find that a simple scrubbing/shampoo removes most of the smell/hair/any stains/etc.
4) Whatever changes you make, include some that prevent your dogs from getting hair everywhere (how often are they riding around with you in your car anyway?). Even if its as simple as putting and old blanket over the rear seat when they ride with you.
One thing about cars - I don't know anyone who is embarassed to have friends ride in their car
that also takes very good care of their car. You've already learned the lesson with paint, but it extends to almost all aspects of car ownership - preventative maintenance, cleanliness, caution, etc. If you take care of your car like you want it to last forever, A) it probably will and B) you'll probably feel pretty good about it and not be the slightest bit embarrassed to have a few friends ride with you.