1. Wipe down the paneling with a deglosser (like "Paso")
2. Prime with an oil-based primer (or pigmented shellac).
3. Sand lightly and fill any holes and caulk around any door or window trim. Spot prime filled areas.
4. Apply two coats of a quality oil-based paint. Latex just won't do as good a job as oil-based paint.
Yes, it's a lot of work. I had painted paneling in my living room when I moved in - and it looked terrible. I just finished ripping it out and drywalling it. You should consider just removing it, as it will never look really good painted.