Sue,
Yes, prefinished wood paneling can be painted with great results. First clean the paneling with a mild detergent solution, rinse and allow to dry. Next you will need to prime the walls with a bridge primer/sealer such as ( Kilz TM) or ( CoverStain TM). These primers come in both a solvent base and water base. I suggest that you use the water based product simply because of the strong fumes associated with the solvent based primers. regardless, you will still need good ventalition while priming or painting.
Caulk the cracks and putty the holes that show up after priming. Apply two coats of acrylic/latex finish paint in the sheen and color of your choice.
Hope this helps
rmichael
