This is in our living room. I want to change he look of the walls.

paint the paneling, or cover the paneling with new sheet rock, prime and paint

I have simply painted over dark paneling with flat latex wall paint and it looks nice. I have also spackled the grooves and then painted but that is alot of work!

Paint.

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.

I'm a tear it out and install or repair drywall kind of person. Do it once and do it right.

I have seen painted paneling in friend's homes and it looks good. Make sure you sand or use liquid sandpaper to kill the gloss before you paint. I would not bother trying to fill the seams and knot holes first. That would be more work than removing the paneling.

I painted mine, we had cherry dark paneling in our den and it had some knot holes like yours, we used good paint, did not even have to prime, two coats did it, a very light blue. It is a very large room. It came out beautiful. Also we did not have to sand, just wiped in down really good.

I love the look of painted paneling. Good luck with your project!

Can you whitewash it? That can look very nice; it gives things a kind of country chic look.

Paint works well. I would prime it first, since that is what I have .

It is recommended that if you fill the grooves, to prime first, so that the dw compound sticks better. I didn't fill them, just saying what was suggested to me if I wanted to.