Its such a shame to paint all that cedar, why not just take it down and go for the drywall you seem to prefer in the first place?
If you insist on "ruining" (in my opinion) all that wood, you can try painting it, but you are going to need some very good primer first. Binz and Kilz are both products that various people swear by, although they never seem to like both at the same time. Beyond that, you might consider specifically treating knotholes, and any dark areas (which could be indicitive of extra tanins) before you get to your painting stage. Keep in mind that these primers will make you HIGH if you don't have adequate ventillation... Time to break down and buy the charcoal canister face masks (3M makes a good one).
Beyond that, plan on at least 2 coats of a superior semi gloss latex paint. Paint Guy will tell you that the stuff you buy at the "big box store" is the same as what you buy from sherwin williams or any other professional store. I will tell you that spending a few extra bucks a gallon on the premium paint at the specialty store (ie kelly moore, sherwin williams, etc) DOES make a difference, along with the expert advice and assistance you won't get from the kid in the orange apron who last week was asking his customers if they "want fries with that".
Personally, I wouldn't buy the house if I didn't like the cedar, its like marrying someone with the idea that you can cure them of a gambling habit.
Buy a house you really like. Don't destroy that beautiful wood.