The color of the wood is lovely, there's just too much of it. I would keep the ceiling as is, it seems to go well with the flooring. By the time you have all the walls sanded, primed, and painted (big job) you will be spending as much as having the paneling removed and drywall installed. I would remove the paneling carefully, someone will be happy to buy it from you. Keep the mantel as is, it will look fine once the drywall is up. The fireplace is enough of a statement piece, no "accent wall color" needed.

It is beautiful, Do not destroy it, I can understand that you may feel like it is overwhelming. I agree with Kmkane, you should paint the ceiling since it already has either white speakers or lights recessed into it I cannot tell from the photo. If that is not enough I would add a nice sized base and casing around the window and doors and paint them. Yes it will be a pain to prep it right for paint but, you have texture and depth , people think putting drywall in is cheap, it is a flat wall, years later they go back and add panels/wainscoting/molding to break it up. Just browse Houzz every wall you like will have a texture.

Too much knotty for me I would start by white washing the ceiling and darkening the mantel and see if that is enough to paint the pine you will need to seal with a shellac based primer and IMO you usually needs 2 coats of it then 2 coats of paint with whitewashing the knots show