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Yes, you can apply peel-and-stick wallpaper over wood paneling, but it requires significant preparation for a good result. Peel-and-stick wallpaper has a weaker adhesive than traditional wallpaper and works best on smooth, non-textured surfaces like painted or primed drywall. Because wood paneling is often textured with grooves, any flaws in the underlying surface will likely be visible after application. To prepare the paneling, you must ensure the surface is free of cracks, holes, and protrusions by filling any indentations and sanding rough spots to create a smooth surface. An alternative is to remove the paneling and apply the wallpaper directly to the underlying drywall or plaster, provided it is in good condition.

The pros of wallpaper include its durability and longer lifespan than paint, as well as its versatility. The durability can translate to lower long-term costs for upkeep and replacement, and the versatility means you have more options for customizing rooms in your home. Some downsides include that it’s difficult to remove, it’s not ideal for rooms or areas exposed to high moisture content or sun exposure, and it’s tricky to install. A professional wallpaper hanger can help mitigate these issues, though, by installing it properly and in areas suitable for wallpaper.

While textured walls can elevate a space in many ways, there are a couple of downsides to consider. Namely, they’re hard to clean, and some textures fall out of fashion quickly. Make sure to consider all your options to find one you truly love before diving in. 

No. If you overlap seams, the wallpaper will not come out flat. In addition to possibly throwing off your pattern match between rolls, overlapping seems necessary. If wallpaper is properly acclimated, and temperature and moisture conditions are optimal during installation, there is no reason to fear shrinkage as it dries.