I had vinyl wallpaper on wallboard (the kind that it comes with from the factory) in my kitchen. I peeled it off, used Kilz to prime it and then painted it with latex paint. I took off the strips that cover the seams and did some taping and mudding too. Came out pretty nice. I also did a little test area where I just used the kilz over the vinyl wallpaper and it worked.. however I've seen pictures of some where it peels off after awhile. The Kilz leaves a good surface for you paint to stick to. My vinyl wallpaper was very easy to peel off.. like contact paper.

Woah! Marcolo, after reading about that, I want to vinylize my whole home! These suggestions are useful. I'm thinking perhaps wallpaper elsewhere and using maybe a plain vinyl paper in the alcove or getting a super water-resistant paint over the tub. Oddly enough it's the smoothest looking wall in the bathroom so it might look okay painted. I wouldn't know how to pick a complementary tile to go up there. It's got a very finished edge. It does get wet when adults use the shower--the tile only goes up 5 feet. The wall has no business being in such good condition, but the shower fixture is a comparatively recent addition. I've definitely checked out savethepinkbathrooms--mine ain't pink enough! The flamingo wallpapers don't match. :) Most colors that work with pink just don't go. It's a peachy tannish pink. Thanks for the suggestions. I guess there are better options than paneling my wallpaper.

"brickeyee" I appreciate your input about using drywall instead of floor boards. I've wrestled with that idea for a few days now. Here's my problem. The plaster walls are really old with a lot of bows and bulges, I thought the wood product would be stiffer and maybe give me a smoother finish than drywall. I thought the drywall might telegraph the imperfections of the wall. Plus, i have never taped and mudded before and when I mess that up it might look worse then the seams of the wood product. I don't know ? Additionally, I'm doing V-board at the bottom and the top 4 ft. to the ceiling with wood panels. I hope it does not turn into a disaster.

Yes, compound will stick. You will have to "skim coat" the torn off areas. You don't want any rough paper to paint over - only smooth paper or joint compound. Personally, I like to replace drywall if it is too ripped up. It's a judgement call.