Jim, can't say that I am familiar with the panelling you describe, but assume that it is like a Formica type surface, ie: smooth, non porus and shiny.
It can certainly be painted, but will require priming first. I suggest Zinsser 1-2-3, which can be painted straight on the panelling without sanding first.
What worries me are the joins. The panels are just butted up next to each other I suppose. I'm kinda thinking that whatever you do will show. If you tape and fill it will show, and if you sand the joints down and fill them, and resand them, they might last a short while, but with the humidity rising and falling, and things expanding and contracting, I don't think it would last long.
I go along with Wolfie, I think it would be best to remove the panelling, get back to the original substrate and start again from scratch.
I know it's all agg, but you only get out of a job, what you put in to it.
Hope this has been of some help.
Modified;
!0 minutes later... after filling the joints, and the panelling is primed, I suppose you could line the walls with a good lining paper, say-1400 grade, seal it with a coat of emulsion and finish with your choice of paint.
will give that further consideration.