I'll be very interested to see the responses to this question. I just finished cleaning up after removing a plaster ceiling. I'm also removing plaster from an interior brick wall. What a mess! It took an entire day to knock down the ceiling and clean up the huge pile of stuff that fell. It's pretty heavy, makes lots of dust and has to be taken to the dump. I'll bet Eric and Brickeye can weigh in on this subject.

I'd repair it in place w/o covering it with sheetrock. Cracks and holes are quite patchable, either by a home owner or a real plasterer. Sheet rock hangers have no use for plaster, so don't be surprised if they want to pull it. Before you do so, try getting a plasterer to look at it with an eye to repairs. It's not as expensive as you might think. Removing plaster is one of the nastiest jobs to do with an old house.

Below is a link the publication that describes, very well, the range of things you can do to fix-up, repair and patch plaster. They also have lots of other useful topics (scroll down on the page to link to index).

Molly~

Here is a link that might be useful: National Park Service Preservation Brief on plaster repair

We did not remove the plaster before sheetrocking some of our ceilings (one bathroom and bedroom) and did remove it on the walls of the kitchen because we had to get to the electric and plumbing.

Plaster is very good at preventing sound movement inside a house. It is heavy, stiff, and thick.
It is still considered a better finish than drywall, but cost has severely curtailed use.
Even 2 coat plaster is not very common anymore. Veneer plaster (blue board with about 1/8 inch of plaster) is often as close as you can find.
Unless the plaster is massively failing and coming loose all the way to the lath, I would do a quick spot repair with Easysand, than cover the entire ceiling with drywall if it really looks bad. This will preserve the sound deadening properties of the plaster and provide a new surface. It will never look as good as a well done plaster surface, but I fully understand the costs involved.
If the plaster has failed and the keys are pulling from the lath, it is likely on its last legs and will need to be removed. Wood lath is not normally a smooth enough surface for drywall (the lathers new the plaster would cover any irregularities). On some older houses even the joists and studs are not flat enough to use drywall. The fastest method is to sister new 2x lumber to the side of the old studs, standing proud enough to create a new plane for the drywall. Screw or use a nail gun to fasten the sisters, hand nailing allows things to move around to much as the nails are driven. If there is still plaster attached to the studs on the opposite side, a screw gun is a better choice.
A laser line projector works well to get a good plane for the sisters.

tough call. could go either way. if you tear it down dont forget that old plaster sometimes had asbestos in it. if you leave it and rock over it dont forget to mark your ceiling joists on the tops of the walls.

My plaster ceiling fell when a rolling chair in the attic rolled off the rafter. The whole ceiling crumbled because wires were connecting them all. Had someone been in that room, they could have been killed. I have 3 other rooms I'm considering replacing with drywall.