If you don't want to invest in new drywall/sheetrock and having paneling, here is a straight forward DIY option if you dont mind a textured wall. Also a good option if you have a heavily damaged wall.

These photos are from our cottage on the lake .... I removed all of the molding that covered the seams of the wall board. Then with a bucket of ready made drywall mud and a 6" knife I applied it all over the walls. No need to be perfect and you can apply it as heavy as you want. I did fill the seams of the wall board first, then just started applying throughout the whole room - getting as close to the trim as possible to give a natural look. Give 24 hours to dry completely before painting!

Then paint (see staged photos). Then I applied a translucent glaze that I purchased at Lowe's. Finished product is kind of tuscan looking stucco! Affordable and easy .. and its a pretty good workout for your upper body! :)