I recently completed work on the paneling in my basement. It turned out great, but took a lot of time. Here is what I did:
1. lighlty sand paneling to remove any clear coat on the surface.
2. take wood filler and a putty knife and fill in all the grooves.
3. (At this point you could prime and paint)but if you want a textured drywall look you then fill a paint tray with drywall dry wall mud (you can get it in 5 gallon pales) and roll it out with a regular 3/8 in. nap roller.
4. Prime
5. Paint
Again this process takes a lot of time, but it is easy and difficult to screw up.