Drywalling over Plaster??

Hi all...
I am getting ready to reno my kitchen. There are a few items I can't seem to settle on though. As we have a quite old house (around 80yrs) we have walls made of plaster. In the kitchen, there is roughly 3.5 ft of wood panelling (i think its called wainscotting) starting from just above the baseboards. Above the woodpanelling there is really old wallpaper. As a finished product, I would like to see the walls as "clean" as possible. I was unsure whether I should remove the woodpanelling and drywall over top of the plaster, or pull out the walls altogether and start from scratch.
As the layout of the kitchen will undoubtedly change somewhat, I will also be adding new electrical boxes in the ceiling (which I will be taking down, not drywalling over).
PS... there is a slight difference between the upper part of the walls (where the wallpaper is) and the lower part of the wall (where the woodpanelling is).
Any advice is greatly appreciated!!
Thanks!!
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We are in the final stages of a very similar project. Our house was built in 1909 and had lath and plaster with drywall over that and fake brick over that.
Our solution was to strip it to the studs, rip out the floor and floor joists (most were showing signs of rot), rip out the ceiling and ceiling joists (ceiling was badly out of level). We ended up reframing the exterior wall and adding a stud wall up against one interior wall that had the studs mounted flat instead of on edge.
One of the most important things to remember is that you will be putting cabinets in your kitchen so the floor and ceiling need to be very close to flat and level and the walls must be plumb and square. I can gaurentee that in an old house, nothing will be level or plumb.
Good Luck!!!!

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I have drywalled over plaster with considerable success in a 50 year old house. I have used 1/4 inch drywall in some cases, 3/8" in others. There is no reason to assume a priori that your structure is rotted or unsound (but you should try to determine this--if you are going to redo the walls anyway, punch a few holes and look at the interior.
If the walls are seriously out of line (and no reason, again, why they would have to be--I just finished working on a 130 year old place that had remarkably good walls (bad floors, but good walls), then yes, it will be a trial to hang cabinets and so on.
One more or less compelling reason to gut the kitchen is that you will be able to insulate properly. On the other hand, you may live in a mild climate where heating bills are not a great concern.
Gutting a part of the house makes a fabulous mess (you have to see it to appreciate it), and you will be LIVING in it, making it even easier to appreciate. You will also be stirring up some lead-based paint dust in all liklihood. It is certainly the "right" way to do it but it may not be necessary. You can just get long screws and screw the drywall to the studs (which you have to locate, a challenge in its own right) right thru the plaster. As I say, it does work well, and is not particularly messy. I did this to the entire living room and dining room of our old house because I couldn't stop paint from cracking off the walls. I removed trim around windows and replaced it. If you make the wall a lot thicker, it does complicate the trim picture, but there are ways to deal with it.

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