The product Mike is referring to is called "Gardz". It's made by Zinsser's and is sold at Home Depot.
Or, smooth out that brown paper as best you can with whatever works, apply the Gardz to seal the brown paper, and when dry, apply the two layers of fiberglass mesh over the Gardz. You probably don't really need to replace the strength of the missing paper; the wall will look find without doing that. But, if it wuz my house, I'd put some fiberglass mesh strips down to build up the strength of that area.
Skim coating a wall isn't hard. Just work with a bright light close to the wall, but far enough away so as to cast light at a sharp angle, making the wall look rougher than it really is. That will give you a good idea of where you need to add joint compound and where you need to remove it to get the area smooth. Once the area looks reasonably smooth under such critical lighting, it'll look perfect under normal lighting. Then, primer and paint.
Last edited by Nestor_Kelebay; 09-17-2009 at 07:48 PM.