First possibility: I suspect your house is too large.
Housing requirements have changed since 1.1 (here's a link to an outdated article on housing at the terraria wiki). As of 1.1, a house needed to be a minimum of 60 tiles and a max of 750 (in addition to the other considerations).
This is an excellent guide to housing from the terraria forums, which is up to date through 1.2. It does not, however, list any hard and fast maximum sizes (it is worth noting that the minimum size in 1.2 is much smaller than the 60 from 1.1). You can do some experimentation to get an idea of how much room you have to work with. Try adding a ceiling somewhere below your actual ceiling, and then check the validity. If you are invalid, move down (contrary-wise, if you start low and are valid, move up).
Wherever you settle on for the location of the "middle" ceiling, you can probably make part of it a platform and wind up with 2 valid housing sections.
Edit (as asker edited after I posted this):
The corruption issue: I see you have built out of Spooky Wood and Demonite Brick (good to know!). It's true that in 1.1 your house's "corruption score" had to be <250 to be valid (with each "corrupt" block in a 45 block radius counting as 1 score). It is not currently known if this has changed in 1.2. There is no evidence that Spooky Wood counts as corrupt so far. I will test Demonite when I get home, however in 1.1 Ebonstone brick (regular ebonstone does; I suspect Demonite brick is safe) did not add to corruption score.