Help w/ finishing vertical tongue and groove paneling
I have renovated a circa 1923 bungalow and both sides of the wall between the LR and DR were panelled w/ random width, vertical, tongue and groove boards. I could not believe that this was original to the house so wanted to get rid of it. Because of the crown molding, baseboard, and door casing I did not want to take it down or even sheetrock over it. What we did initially was just to fill the V-grooves w/ 90-min. mud, float the walls out, and paint. Looked fine for awhile. Then the mud in the grooves not so much cracked and fell out but looked like it swelled up, raising out of the grooves. It also felt soft like putty as if it was damp. We redid it, this time first putting a bead of caulk in the groove to allow for movement. A month later and we're right back where we were. If it were brittle and cracking I could understand but it is not. It is again like putty and bulging out. What is going on?
I'm looking for a permanent solution. Fibatape makes their fiberglass mesh joint tape in 3' wide rolls - thinking about that but that may not work either if the filler bulges out again. Sheetrocking over is a last option - any other ideas?