HI - Because of the age of the paneling ,I think it all should be removed and replaced with drywall . All the electrical needs to be checked and up graded for todays lighting and tech changes , and you will probably need a new larger panel . This will also give you the opportunity to add more insulation if needed . And this will also be the time to add new L.E.D. lighting ,like pot lights and extra wall sockets etc.

That is the way I'm leaning, however, I want to be sure as the cedar is in very good shape and looks great. The problem is there is too much. I was thinking of maybe some kind of paint or fabric cover. I like the idea of being to see the wiring as I've already found a lamp cord in the wall that only had electrician's tape on it. Scary.