Unfortunately you don't have a lot of fantastic options. The best idea is to take a rasp (think industrial cheese grater) to the walls to take off the high point and somewhat level off the ridges. Then skim coat the entire room. A trained drywaller is best to use since this is one of the most challenging drywall projects there is. It takes a certain talent to make this disappear but it can be done. Option 2-buy beadboard sheets 4x8 at the hardware store, glue them to your walls, add crown moulding at the ceiling and paint in your color of choice. This will give you a cottage chic look. Option 3-new drywall. Hope this helps,
Good Luck,
Kelly
Silver Design Group