Chocolate is going to make it really dark in that room, and unless you're replacing the carpets, it won't go with them, either. The wood paneling appears well-crafted and high-grade. That around the fireplace is worth saving as is. If you paint that area white, the fireplace is going to "disappear." Suggest you save that part as is all the way to the sconces. Paint everything else. Paneling requires a special surface treatment to make paint stick. Check with a professional.

Definitely remove the wallpaper. Here's your chance to use chocolate since you can paint the upper a light color. However, I will say this: wood painted brown (any shade) always looks cheap because it looks like it's trying to imitate a wood color, and never works. Before you paint that hallway wood, paint the upper. YOu may find that you like it enough not to paint the wood.