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Updating walls

Updating Paneling --I have an older home whose basement walls were finished many years ago with masonite paneling which has a couple layers of wallpaper. I need to update and want to do as much as possible myself. I don't really want to remove the masonite panelling, but I don't think paint or paper is good option here. One builder who looked at it suggested thin drywall over the panel. Is this a good option? Any suggestions, short of ripping it all out, which I'm not sure I can do?

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