I would like to paint over the paneling. How would that look?

Answer:
If you can’t afford to replace the paneling, painting is your only and best option. Truthfully, after the room is decorated, most people wouldn’t know that it’s paneled; the eye gets drawn to the decorations not the walls. Proper prep is key! What no one has said is the importance of a good primer. Without a good primer, the paint stands a chance of not sticking and you will end up with a mess. Wash the walls down with TSP (follow package directions as rubber gloves and good ventilation are required). Allow the walls to dry overnight at least. Repair any holes with the material of your choice. Caulk works but can be a bugger to get smooth; I’d go for one of the patching compounds available. They are easy to apply and sand up real quick if allowed to dry. Apply at least one coat of a good primer like Kilz or Bull’s Eye 123 and let dry thoroughly. Primer will not only make sure your paint sticks to the paneling but will give you a truer color when you apply the top coat and will make your project last longer. And primer is still cheaper than paint! Then apply one or two coats of your top color. You may have to use a brush to get the “grooves” and then roll the rest of the wall with a roller. Remember for best results always keep a wet edge. Meaning don’t cut in more than you can get both cut in and rolled before the first area cut in dries. With the new paints that dry so quickly, this is usually about a 4 foot section. That way your cut in areas blend better.