So here's the deal:
The previous owner of my house did an absolutely terrible job (he used 3/8 drywall on 24'' center joists and sometimes didn't end a piece of drywall on a joist) at drywalling the garage. I've already ripped out the ceiling drywall (he only finished 1/3 of it anyway) and furred down the ceiling on 16'' centers so that I can put up 1/2 drywall.
Now, on to the walls: they are in fairly bad shape over the years due to run-ins with tools, snow-blowers, etc. I had thought about tearing out the old drywall and putting up new, but instead I think I'd like to just go over the drywall with plywood and then paint it white. I've seen that done before so I wouldn't be the first guy to do it. But, the walls are also insulated with fiberglass insulation (probably 2-3'' of kraft-faced) and I was wondering if I should really be leaving that, or tear everything out and start over again. Would you leave the old wall and put plywood over the drywall? Or would you tear out the drywall and insulation, put in new insulation, and then put up plywood?