Drywall or Plaster?

I recently bought a 1923 bungalow which stays pretty cold. I have forced air gas, but have to turn it up quite a bit to keep the house warm. As I plan to take all of the 23+ year wallpaper off the walls, a friend advised me that I may want to simply rip out the lath & plaster on the inside perimeter walls. I could then insulate those walls and put up drywall on them. I don't have a problem with the time involved in such a project, but is this a smart move? If so, what tools will I need to accomplish this? Thanks.