It sounds reaaaaaal bad. It's really 6 of one, half-dozen of the other IMO.
Hire a pro to skim-coat the walls. The reason I say a pro is because he can do a better job of it in 1 or 2 passes than you or I can in 3. Or, you can remove the drywall yourself, hand the new stuff yourself, and spend the same amount of $$$ in Option 1 to have a pro do the seams, corners, and such. In EITHER case, you can prime then paint.
For good Primer/Sealer, look in your Yellow Pages under PAINT - RETAIL. Finnaren & Haley is my personal favorite. SHerwin-Williams is another favorite of some of the Regular Follow-uppers. DON'T skimp on the material! Buy the proper nap roller and brushes, and if you're not familiar with Basic Painting 101, it would pay to read about it before you dive in. Believe me, your research will prove useful!!! Plan on 2 top coats, and don't skimp. The 2nd coat of top paint will go on much easier and quicker than the 1st. (The 1st coat may even look like 'crap' but the 2nd coat will take care of minor 'mistakes'.)
If you need more help, Post up. My best to ya and hope this helps.
PS: Maybe you can get one of those Basic Remodeling Book Sets from Time/Life or Reader's Digest for your wife for Mother's Day. (IT comes before Father's Day, and if you don't get it for her, have your wife or the kids get it for YOU. That way, everyone will have something to read before they take a hammer to use to remove a light bulb, at least by July 1st!)