Just because a wall has some chips or cracks -- or even a hole or two -- doesn't necessarily mean it has to be replaced.
There are two reasons to save an old wall surface: because it's the best way to save old trim (assuming the old trim is worth saving); and because you may save some money if you do the work yourself.
The bad news is that the work is time-consuming and labor-intensive, but the good news is that almost anyone can learn to fix plaster or drywall so the repairs are invisible. The processes used are the same as drywall finishing, with some refinements.
Basically there are three types of old-wall repairs: plaster over brick; plaster over lath; and drywall. (Drywall? Actually it's been around for about 50 years. And 50-year-old drywall makes an old wall.)
The easiest wall to fix is plaster over brick where the plaster has a finish, or white, coat. In many cases these walls are the sturdiest, so less goes wrong with them over the years. As houses age, however, they settle -- rarely evenly -- so walls and ceilings crack at stress points. If the cracks are tiny, they can be dug out (to remove all loose material and to provide a better "grip" for the new stuff), wet down (with a simple hand sprayer) and filled in smooth with a non-shrinking, fast-drying plaster (one brand is Sta-Smooth 90, from Gold Bond). If you use joint compound, it should only be for a final, thin coat.
Larger cracks will require digging out, spraying, filling with fast-drying plaster, and taping with drywall tape. (Embed the tape in a very thin layer of plaster with hard strokes of a 4-inch drywall knife.) When the tape and plaster are dry, finish as if it were a drywall joint. (We did warn you this was labor-intensive.)
The more taping of cracks you do, the better the wall will age from now on. If you skim over the cracks, or fill them without taping, they are likely to come back. Cracks coming back are a major reason people don't like old plaster.
Tape is good for bridging the gap between disparate surfaces. We tape and spackle plaster walls where they join drywall or plaster -- if, for instance, you left plaster walls but replaced the ceiling with framing and drywall, you should tape around the ceiling. Even where the surfaces meeting are both plaster, it's still a good idea to tape and spackle.
A word about old plaster techniques: The plaster was usually applied in three layers, a rough coat, a second coat known as the brown coat, and a third, or finish, coat of fine smooth plaster. In some cases, the plasterer stopped with the brown coat, which was then wallpapered over. The surface was never intended to be painted.
If you strip wallpaper and find a brown coat underneath, you can still repair the wall for a painted finish by "skim-coating," or applying that last thin layer of fine smooth plaster. It's a lot more work, but you will have saved the old wall. Apply ordinary joint compound thinned slightly with a little water with a 12-inch drywall knife. Use long smooth strokes to minimize sanding.
If plaster is missing back to bare brick, it can still be repaired. The first step is to nail in a piece of galvanized wire lath, cut to fit the hole. Use 2-inch galvanized nails driven into the joints between the bricks. Next, half-fill the hole with Gypsolite, a coarse, concrete-like plaster. Let it dry completely.
To apply the finish coat, you may still be able to buy regular finish plaster, but it's harder to work with -- there's more mixing, and the material may shrink. It also dries slowly. We prefer Sta-Smooth 90, which dries in 90 minutes or so, if it's not too thick (or too humid). Sta-Smooth makes a hard surface, and it's hard to sand, so apply it as neatly as you can. Fill the hole almost but not quite even with the wall and let it dry thoroughly. Then embed drywall tape in a thin layer of joint compound where the new and old surfaces meet. Let it dry and finish like a drywall joint. You may have to skim a larger area around the patch to get it even.
By the way, you can't use joint compound on uncured plaster -- that is, anything newer than about six months. They're chemically incompatible. You can use Sta-Smooth over plaster that's just dried, and over Gypsolite.
When the patch or newly skim-coated area is dry, prime it with oil-based primer. If any stains show through, use a stain sealer (pigmented shellac) before painting. When the surface is primed and/or sealed, you can apply latex-based paint.
Repairing plaster over lath is a little trickier. First evaluate how much of the plaster is loose. (When the plaster was applied, it oozed between the lath. When it hardened,the glops behind the lath, called keys, were what held the plaster. Over the years, the keys get broken, and the plaster loses its grip.
If a large area is loose, it may not be worth saving. Ceilings, especially, are hard to repair. On the other hand, if you have valuable trim, medallions or crown molding, you may want to employ superhuman effort to save the surface.