I just bought a 120 year old home with the same horsehair plaster problems... Here's what I've been doing, that seems to work:
Cracks: widen them slightly with a screw driver and fill them with silicone caulking. Then use your finger to ensure that the caulking is not extending beyond the plain of the wall. Then use joint compound to fill over the top.
Crumbly plaster: Where the plaster is crumbly or not all that smooth I've been using joint compound to apply a skim coat. You can actually see thought the joint compound, I use a really wide putty knife. Then I sand and sometimes repeat. It's not really that much work and you end up with a smooth wall.
Painting: OK now you've repaired the walls and are ready to paint, I'm told that an oil based primer sealer is the best stuff to use (it's nasty stuff though so you need to keep the room ventilated).