Rapaire, another thing you might consider is a heavy anaglypta wallpaper which you can put right over the stuff and then paint it with latex.

It looks fabulous and it will save all the prep work aside from a good cleaning. The feature wall of the pics I linked to above was done that way and it was directly pasted with no groove filling and works great.

If you don't have the bucks, do some walls of painted panels and a feature wall of the wallpaper.