The wall material in the photo seems to be some kind of glued and pressed bamboo? Anyone recognize it? It ain't drywall!

I think a lot of it was used in the 50's, maybe the 40's. I think it was plywood with the surface layer having texture from the wood being split. The original natural finish was very attractive, but likely most of it has had paint slapped on it in the last 50 years.

That leaves a dirt catching mess. If it has that insulation under it, perhaps rip it out, redo the insulation, and put an attractive wall covering in its place.

I think a lot of it was used in the 50's, maybe the 40's. I think it was plywood with the surface layer having texture from the wood being split. The original natural finish was very attractive, but likely most of it has had paint slapped on it in the last 50 years.

That leaves a dirt catching mess. If it has that insulation under it, perhaps rip it out, redo the insulation, and put an attractive wall covering in its place.
I'm thinking about drywall in its place after replacing the insulation with fiberglass batts. Your opinion?

I find it a pain to mud, but is is a cheap, standard material. The only problem I see is the thickness. Drywall is at least twice as thick as most paneling. I am not sure what would happen at the windows and doors. If you have painted woodwork, you could remove the trim, shim out to the drywall, replace the trim and repaint. That would also give you a chance to detail the insulation between the windows and the rough opening, likely neglected when your house was built. Could also be an excuse to upgrade the windows to.

You could go with a retro look by replacing it with new wood paneling. There is also paneling that looks more like wallpaper, giving a more current look.

I find it a pain to mud, but is is a cheap, standard material. The only problem I see is the thickness. Drywall is at least twice as thick as most paneling. I am not sure what would happen at the windows and doors. If you have painted woodwork, you could remove the trim, shim out to the drywall, replace the trim and repaint. That would also give you a chance to detail the insulation between the windows and the rough opening, likely neglected when your house was built. Could also be an excuse to upgrade the windows to.

You could go with a retro look by replacing it with new wood paneling. There is also paneling that looks more like wallpaper, giving a more current look.
Thanks for the suggestions.