I am now a panel painting expert. I have a WEENY dining room (10x11) in which someone put up 4 ft high pine paneling (like wainscoting) in the 50s. It was dark (not pretty) and the room looked sad ... kind of like a tiny fenced-in backyard. I'm doing a French country cottage look and doing all trim in Dove White (you must decide on a style and a color to suit your decor/theme). I also painted the dark pine colored door frames and windows.
I taped like a mad woman (even the ends of the floor boards right up to the paneling). I taped newspaper to near the walls. I covered the floors with the very best quality drop cloth (tough canvas on top, rubberized underneath). Paint spills will absorb but not go through; ladders won't slip.
I did not sand or clean (except vacuum). I covered all the paneling with 1 coat of Seal Grip Interior/exterior Acrylic Latex Stain Blocking Primer by Pittsburgh Paints(open the windows!). The hard part was getting it into the deep grooves. I used not the best bush and crammed and wiggled it into every nook and cranny.
Then I pushed latex spackle into small holes ... smoothing it into rough places ... building it up into gouges.
Then I put latex caulk into extremely deep grooves (in the corners where the boards fit oddly).
Then I put touch up of the primer over the spackle and caulk. I let this all cure for at least 24 hours.
I then put 2 coats of latex paint on the paneling and framing. I used semi-gloss by Benjamin Moore. I used a better brush but again I had to wriggle it into the crevices and then smooth out (lay off) up and down to keep a smooth appearance. I always worked around the room up and down on the paneling; then I went over the cap (top of the paneling). It doesn't matter that you see the shapes of the knotholes, etc. It ensures an elegant country look (casual chic). I glazed the walls above the paneling in B Moore's Sante Fe Pottery and left the aged pine beams in the ceiling untouched. Friends are entirely shocked at how beautiful the room looks. Those who screamed "don't paint the paneling!" are now apologizing.
I will never again be afraid to tackle paneling.

TIP: Take that painters tape off in 4 hours or less. If you let the paint dry more, latex has the annoying habit of STRETCHING where it stuck itself to the edge of your tape and tends to pull off of the wood!
TIP: Take your time if you can. It won't hurt a thing to let the primer and paint coats cure well. It's even better.
TIP: My interior designer and the paint store experts said use latex, not oil. Latex has improved immensely; why kill yourself with the stench.