Hi, Fran. Please don't sand. All you will do is lose defination in the grooves and other molding details in your paneling. I suggest that you strip with a relatively safe product like Citristrip if you still want any chance of the wood grain showing. Since the finish is probably pretty old, it should come off pretty easily. Glob some on and don't brush back over it to get the stripper layer smooth any more than you really have to. Brushing back over it lets the active chemical escape. Remove the finish/stripper goo with a putty knife on the flat parts and a stripper pad in the grooves. I really can't tell you how long to let the stripper stay on the surface since every case is different but check a small area after an hour or so. You can leave the stripper on for 24 hours if you need to but I really do not think you will. If you start out by stripping relatively small areas, you will quickly get a feel for how long it needs to stay on to work. I do suggest that you do this when you can open the windows in the room. The orange smell can get pretty strong and it is much safer to work with good ventilation. You want to wear eye protection (goggles) and rubber gloves while you are working with strippers. The stripper will remove any clear finish but it will not remove stain.
One thing that you might try after you have stripped is one of the colored stains that Minwax sells. You might be able to go to a pickled oak look or something even over your old stain. A lot of the knotty pine put up back then was nothing more than white paint put on the boards and wiped off so the grain could still be seen. Again, I can't tell you for sure that this would work or how it would look without seeing your walls but you can test it in a small area pretty easily. If that seems like a good finish for you, you will want to put on a polyurethane, varnish or shellac to seel the wood back up.
Should you decide just to paint, you can paint over shellac with no problem. You do not have to strip. The primer/sealers like B-I-N are shellac with a white pigment to make it easier for you to see where they have been applied.