Is it better to remove paneling or sealing the spaces and paint?
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that will depend on how much renovation you are willing to tackle
Depending on the size and desired outcome of your project, you can paint paneling very easily. Fill all holes with spackle, wash walls with TSP & warm water, PRIME with Kilz2 (water based), then paint. Voila! a new room. Enjoy.
My MIL had someone caulk the spaces and smooth them out, then she got him to paint it a beautiful light mint green. Turned out great and made all the difference in the dark den. I think if you remove them you're asking for more problems than you want to deal with.
It's probably easier to seal the spaces and paint, and it's easy to do:
https://inmyownstyle.com/2016/01/how-to-paint-wood-paneling-from-the-1970s.html
Truly, what is under it may be a problem. You could remove one panel to look. You probably are better off painting. Most paneling I've encountered covered plaster that needed repair, in older homes. It was a cheap fix.
It depends on the look you want. Leaving the paneling (and having a rougher finish) works well with a rustic/home spun look. Sealing and painting gives a smoother finish that works well with any decor. It is all your choice.
Make sure the paneling is clean and dry. Prime with a good stain blocking primer like Zinsser 123 or BIN. Then paint like painting regular walls. If the paneling has grooves you can fill them with non shrink drywall patching compound. Just put on enough to fill the grooves. Let it dry overnight. Next day use a damp sponge to smooth the patch. Then prime and paint.