By the time the flammability issue of paneling comes into play, you're already outside or dead from smoke. The house is already going to be totally shot after the Fire Department arrives and soaks it all down at this point too. I say don't worry about it!
There are two proper methods of dealing with asbestos- removal and containment- and I like the latter. Were this place mine, I'd get a good-fitting dust mask on, staple and tape plastic sheeting on the ceiling, and put 1/2" sheetrock right over the stuff. Use long enough screws to go through it all and well into the joists.
As to the paneling I'd pull the casings, cover it with 1/4" sheetrock using lots of glue in between, then rip 1/4" strips to go back under the inner casing edges. This is also a good way to deal with cracking plaster walls as long as they are solid. Once you're done nobody but you and me will know that you 'cheated'- everyone else will think the sheetrock and casings are original.
I've been working on too many run-down problem homes of late to know this kind of stuff- LOL!