Knotty pine can be a pretty frustrating wood to work with for a number of reasons but, especially when painting over it. Everyone seems to have nailed it on the head and you should be just fine, but in my experience working with a rough knotty wood especially pine is requires a few additional steps before being able to topcoat it.
First I suggest you lightly sand the entire surface of the paneling, this will give the primer and paint some extra tooth and it will hold up much better. If you plan on filling any of the knots or damaged areas now is the time to do it, use high quality paintable wood filler and you should be just fine. Personally I prefer to use a product like tsp when cleaning any surface prior to painting or priming, the oils in pine oil or Murphy’s oil soap when too concentrated can actually make it difficult for the primer to adhere. After it is all cleaned, dried, and free of dust you will need to prime the entire surface. Some water based primers claim to block out tannins from wood but this is usually not true and will eventually fail or you will notice discoloration and this can occur in as early as a few hours. The tannic acid is water soluble and this is why it will eventually make its way past a water based primer sealer. You really want to use a shellac or alcohol based primer to ensure the knots will never show signs of tannin bleed or peeling in the future. Some choose to use oil based primers when sealing knots this really isn’t the best and even then they can eventually fail due to the natural high levels of tannic acid in the pine. After the primer has dried and the walls seem to be completely sealed go ahead and throw you top coat on there and your all set. Good luck and let us know if you need anything else.