I just got through removing the paneling. It looks like most walls possibly all will have to be redone. Some started crumbling when I removed the paneling. I'd post pics right now but all my furniture is still obstructing the view of the walls. I've gotten an estimate from a friend when he seen the walls with the paneling still on and he said that it would cost around five or six hundred dollars. I'm willing to spend this much but I would also like to do it myself and save some money. I've done some mud work with my father on drywall so I know I could definitely do that. Just looking at these walls I'm thinking I could do this myself but once I remove the drywall I might think differently. I am probably going to need insulation and I don't know how I get that behind the lath and plaster(someone tell me). I hope the insulation isn't expensive. I'm going to get a few estimates from family friends that do this type of work.
That old plaster will just continue to crumble, its really hard to patch. If you look closley at the old plaster you will see hairs in it, they call it Horse Hair Plaster, at least where I come from they do. The hardest part will be removing the old plaster and slat boards, it just makes a mess. and forget about getting insulation behind the slat boards, it not going to work, just start fresh.