Those look like plaster walls to me, and it appears they have multiple coats of both oil based and latex paint on them.
In the areas where the paint is rough, what I'd try doing is using a razor knife to cut through the paint. Now, dig the point of the razor knife under the paint and see if it comes off easily. It's been my experience that sometimes the paint comes off the wall quite easily. In that case, grip the back of a single edge razor blade with a pair of needle nose style locking pliers, and use that to remove the paint from the walls (and probably ceiling, too). But, if the paint doesn't come off the wall easily, then don't fight with it. Just remove what comes off easily in the rough areas. Also, don't remove the paint behind the toilet tank unless there's enough room behind it to paint.
I wouldn't use KILZ as a primer here as there's no need to. KILZ get's it's stain blocking properties from it's very rapid drying rate. And that, in turn, is due to the fact that it uses a mixture of 60 percent naptha and 40 percent mineral spirits as it's thinner instead of 100% mineral spirits like a normal alkyd primer. If it weren't for the naptha, KILZ would be an ordinary alkyd primer. You're not blocking any stains here, so I don't see the point in using a rapid drying alkyd primer that's gonna leave lots of brush marks where you use a brush rather than just using a normal alkyd primer.
Last edited by Nestor_Kelebay; 10-07-2009 at 04:11 PM.