My spouse chose: "B) just create the facade of a panelled wall by put up chair rail and moulding directly on top of the existing gyprock"
In our case, each individual strip was painted, then nailed directly to the wall by hand with a hammer and finish nails. After that, the nail holes were punched, filled, and sanded, then the nail holes painted.
Our walls are plaster, not gyprock. The difference does not matter.