If there is gypsum wallboard behind the paneling and it is in good shape I would remove the paneling completely and repair the walls. Hopefully the installer didn't glue the paneling. I think you would spend more time trying to fill the grooves.

we had dark ugly paneling. I was afraid to take it off the wall in fear of what was behind it. Instead I used a wall covering that can be painted. Wal-tex is one brand. You can find it at your home supply store. It's a little more work-but it hides the deep grooves, and it's washable. Paint on paneling requires a lot of steps to ensure it won't chip off when bumped. Or flake off when washed. For a few deep ridges we used joint compound, and then sanded it smooth. But, we used wall covering over it to cover minor imperfections. Good luck!!