Michelle... I've actually done this - a whole lot! This may be 7 months too late, but you may want a different look in the future. I have a panelled house, as well. Mine is not insulated - so you have me on that count. When I bought the house the panelling was already painted...a different color in every room. This got old, fast. What I did is use a texture paint on the panelling. I think it is made by "One and Only." You can tint it or put it up white and paint it later. If you use the sand texture, you can go right over the panelling making it look like a plaster wall. It does take some practice, but I have been very pleased with the results... quieter, more insulated, etc. There is also a guide that you can buy with the paint to show you different patterns you can make in the paint. I also have a garage appartment that we used the paint on to cover up a patchwork world of plywood. We did the patterns in there because of the uneveness of the walls. One room looks like stucco, the other one has a "fan" technique in it.
There is a second product we have used, also. I was unable to get the paint in the color I wanted for one of the rooms. I used a sand mix that you add to the paint. It comes in a box and you just dump it in. It worked really well, too. One other benefit of this product is in a bathroom. The premade mix mentioned above caused me concern because of water. We got the heavy duty paint (kitchen and bath) and dumped in a box of the texture. So far... no problems.