We have had success painting a room's paneling using BIN primer . First we coated the knots individually with the primer, let it dry, then the covered the whole thing with it. The smell is pretty bad, but it worked . We followed with paint and have had no knots bleeding through. Paneling adds beautiful texture and character to a room. I would not cover it. There are many examples of painted paneling on this site and home decorating magazines. More and more frequently I am noticing designers adding paneling to a room. In another room of ours, we left the paneling as is, but painted the ceiling a creamy white, and painted the wood floor in wide horizontal stripes of similar toned colors.