Is the plaster loose from its keys (the part of plaster that is squashed through the lathe and holds it on the wall). You can't see this, but you can feel it if you push gently on it. If the keys are loose or broken, but the plaster is still in place you can reattach it using plaster washers. Now as to texture, it's possible that you are looking at a patch that was not finished with a top coat. Undercoats (and there are one or two of them) have a brown, rough texture, that could be described as looking like cement. This is not a problem unless you want to move your fridge and expose that wall. In that case you could have a plasterer come and make you a smooth top coat in that area, or try doing it yourself, with either real plaster, or a not so great, but still adequate solution, of using something like joint compound. If you plan to re-wallpaper, just paper over it. In some of my service rooms, I have beautiful very old smooth-finish plaster, but in my best rooms I just have scratch coats because they were easier to apply wallpaper to. And wallpaper was more expensive that homemade calcimine or milk paint, so it was reserved for parlors.

Basically, a 'mud job' is just putting a thin veneer of compound over wallboard..it can also be called a 'skim coat'. It is basically joint compound, rarely it is plaster. Yes the guy has referrals, but what were the projects? Were they sensitive work on old houses to yield something which is like what might have been the original appearance, or were they gut jobs and remodels with no respect for the original house? From what you've said of him, I suspect the latter. Ripping out and replacing work with newer materials often yields an inferior result and costs more money than a decent job--he is pushing for the fastest methods to do the work, like someone who is primarily a 'flipper' of houses, not a true professional. Despite your saying he isn't profiting somewhere with his subcontractors or materials, I don't believe it for a second...he is going to make money somewhere, otherwise he wouldn't be doing the job. Based on the information provided as to his recommendations for the work to be done, he IS suggesting things which aren't needed. With a baby on the way, and new home owners, he is seeing a prime opportunity to make some fast money. Did you get estimates from other contractors and painters? That is an absolute MUST for any project. I know I'm sounding negative to you, but it is just common sense--I used to be a trusting person, but being burned one time too many changed that--and since a house is your biggest investment, you don't want to take ANY chances with such a big ticket expense. With a new addition to the family coming, you absolutely MUST save where you can, unless you have deep pockets, which you say you don't. Just a queston of curiosity: who put the idea in your head that the walls lead paint was a danger which had to be addressed by a complete removal? Paint chips are eliminated with vacuuming, unless you let them accumulate for weeks...and painted trim is going to be more likely to give them especially at corners...but again, the solution is to make sure the paint is sound and has a firmly adhered new layer.

I personally am not a big fan of heavily textured plaster walls and ceilings. So I can readily understand why you are wanting to make some changes. The problem with sanding plaster surfaces is that great clouds of dust are generated this way. The dust goes everywhere. You might be able to scrape off the old texture, and re-coat the walls with smooth skim-coat plaster, but scraping an entire room is going to be a major project, & could take several days. However, scraping has the advantage of generating much less dust, and if you lightly spray the surface with plain tap water before scraping, you can keep the dust to a minimum.

This is in response to the suggestion of taking the plaster walls out in order to insulate. I offer the thought/question for discussion as much as expert responses but with a strong bias toward leaving the plaster intact because drywall is inferior. (Just compare the cost of new drywall to new plaster if nothing else.) At a time when my ex-husband was teaching college classes in thermo-dynamics and consulting for a contractor who built super-insulated, passive solar houses that could function without furnaces in cold climates (by way of expert references,) what I retained from some conversations was that the best insulation is dead air. e.g. when the pink stuff isn't fluffy, the trapped air is pushed out and insulation value lost. So I have thick plaster over wood lath interior walls and thick stucco outer walls in a 1913 house in a very cold climate (Central Minnesota, planting zone 3.) Whatever insulation was ever in the walls is most likely packed down in the bottom of the stud bays. The outside walls are cold to the touch in the winter and cool the rest of the time. On the other hand, it takes at least 24 hours for the house to lose its heat/cold - change interior air temp - to match the outside temp, even with some windows open. With the thermostat set at 65 during the day and going to 55 at 9 p.m. (very comfortable for me,) the radiators heat up in the morning and stay cold the rest of the day as long as the outside temps are +0. In short, I vote to keep the plaster and don't worry about wall insulation in a mild climate.