Re: Plaster or drywall?
Without seeing the walls, it's hard to give a definitive answer. If the plaster is just cracked with a few pieces missing, then replastering or overlaying with drywall is perfectly fine. If large patches have fallen free, then those areas must be filled, either with plaster, drywall, or furring strips before being overlaid with drywall.
The pro's of overlay are relatively clean, no demo required, the con is that there may be clearance issues with trims and moldings, as well as outlets.
The benefit of stripping to bare stud before installing drywall is that you can have a nicer, smoother finished wall when done. You can also update any wiring, plumbing, or insulation while the wall is open.
I suffer from CDO ... Its like OCD, but in alphabetical order, LIKE IT SHOULD BE!!!