I removed all the battens, leaving the 1 x 12 cedar boards attached to the walls. To those, I attached 24 sheets of 3/8" drywall. Then I mudded, sanded, mudded, sanded, and primed. We put on a top coat of a caramel color flat interior latex, and highlighted the division between floor, walls and ceiling with white shoe molding and white crown molding respectively.
Next, I removed the traditional light fixtures, and installed a lighting system we brought back with us from Germany. The system consists of two wires or cables that are suspended about 5" apart and stretched across the room. The wires carry 12 volts DC from a transformer. The transformers we had from Europe are for 220 volts and wouldn't work here, so I bought two new transformers intended to power 12 volt yard lights. These transformers are much less expensive than the decorative ones at the lighting store, and have much higher wattage ratings. In our log home, there is a utility space between the ceiling of the basement and the flooring of the first floor. That's where the plumbing, electric, and HVAC systems are transported throughout the house. So I was able to get the transformers mounted there, hidden from view but hooked up to the same circuit as the old light fixtures.
Next week, the new carpeting is supposed to be installed, and then we can finally put the furniture back and start using this area again.