There comes a point when it is actually less work to do demolition and start over. In this case, removing the old paneling may either reveal a drywall wall or plaster. You have to judge whether that is worth saving. The easiest option is to rent a large dumpster and start ripping right down to the studs. Then you can add electric outlets, repair any rot or structural damage and install new drywall. Belive it or not, it is probably faster than cobbling together a solution on top of existing damage.