Walls and Ceilings - Refinishing drywall in family room

I have a family room that is 12x20. The tape on the seams is coming off, and the walls look like someone ran their finger through it while it was wet. (Looks Terrible!) I want to know if I can retape the seams and sand the walls down a little or if it is better to just put mud on the whole thing. Also, the bottom half of the wall is painted a dark navy blue, will this show through everything when I repaint the wall? Help! :confused:

Start with the bad tape joints and repair them. Also try to figure out the cause of the problem. Was it just a poor job of taping, or is it a moisture problem of some sort that is causing it? Once those spots are repaired, then retexture as needed. As far as the navy blue paint, apply a coat of Kilz to it first, then repaint with the finish color of your choice. The Kilz should block the blue from bleeding through