You bet, Paneling can be painted, here is what I do:
1st- wash with tsp and well rince.
2nd- sand with 150 grit to rough up all the surfaces and vacume up the walls and then go over them with tack cloth.
3rd- Prime with a good quality primer ( I use oil based for best results,You can use Kilz primer for this).
4th- Sand again to smoothen surphace and clean well
5th- At least 2 coats good quality interior paint ( I use Ben Moore paints).