I was removing some old wallpaper and it didn't want to come off very easily. There is a large crack in the wall and I wanted to remove all the paper, fix the dry wall then begin again. However when I started pulling paper away from the crack, the wallpaper came off and so did the top layer of the drywall board, HUGE sections...so it is down to the cardboard layer. Can I simply put a coat of mud on this, then prime and paint, or will the moisture affect the outcome without the paper covering?

You can skim over the torn DW, but sometime it wants to blister and then need to be sanded and skimed again. Or sometime cut out.

I suggest sealling it with Gardz first.

http://www.zinsser.com/wtb-GARDZ.asp?SID=11&WID=27

Then skim coat the torn areas and use tape and mud to fix the crack.

Then prime it and paint.

Thank you, I'll give it a try!