<< Pulling the paneling may be easiest way to cut it. It expanded from humidity
perhaps from the wall itself. >>
Ransley may have a point here. Given that problem, I would pull off the
paneling, allow it to stabilize or dry out for a few weeks, then trim as
necessary and paint the back of it and reinstall. Any cheap oil based paint or
poly varnish would make a decent vapor quasi-barrier. A full out vapor barrier
over the studs might help, but you must judge that for your self. Good luck.