If it is a leak, then the leak will probably get worse, not better. And if you cover it all up, you risk trapping moisture even more so and creating a mold sanctuary. In fact I would guess that you may already have a mold problem if that insulation is all wet above it. Before you do anything, you need to find and fix the leak, if there is one. Then remove any wet insulation or other building materials, clean things up, and then patch things up. Then, after doing all this, if the ceiling is all messed up, you might have another layer of drywall installed over the top, just to make sure you have a good surface to paint.