Previous owners did this, need suggestions!!
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Unclear. What is plastered ? Wall ?.
not sure of the question? I would fill the knot holes, and use a tone-on-tone to accent the 'stripes'
before proposing ideas I need to know location of wall and how space and wall is being used,
I had a similar situation in my home. I chose to do a bright white chair rail, painting the lower section a darker color (was moroccan red but then went to bullet grey) and light color on top (neutral pale taupe then redid with barely butter yellow). Visually appealing and was the feature that sold the home for me.
Seems the previous owner was going to put up drywall or panelling, the wood being the backing for nails/screws.
It looks like a wide beadboard type of design to me.