Furniture, Wood and Cabinetry Finishing - Wood Paper Wainscoting in Colonial

Hello, I have a 1921 classic colonial house. The wainscoting, which I thought was real wood, has turned out to be made from some type of wood paper, backed with cloth, glued to the plaster and lath, and framed out with moldings designed to mimic real wood wainscoting. The wainscoting is all painted, but because of the fake paper the paint is bubbling and peeling. I am planning to put a fresh coat of high quality paint on the entire house, and I am concerned that the paper wainscoting will not weather all the sanding, cutting, plaster and fill that is necessary to prepare for the paint. I am also concerned that additional coats of paint will not correct the problem of bubbling and peeling that is inherently caused by the paper. I am considering removing the paper wainscoting and installing real wood wainscoting in its place (paint grade plywood). I would like to learn more about this paper wainscoting and I am wondering if anybody has knowledge of builders using this paper wainscoting in the 1920s. Was it meant to be an inexpensive alternative to real wood? Is there anything architecturally significant about the paper wainscoting that could influence my decision to remove it? Thanks.

www.detnews.com/2002/homeimprovement/0212/03/e22-23593.htm