betaiota,
sounds like a good idea, but I was thinking, wouldn't drywall be cheaper?

-jasper

I meant using drywall for the underlayment.

Yeah, but when I'm installing the panels I don't want to worry about hitting studs. I'm just not sure if there is a code issue here. My city goes by the standard BOCA codes with a few exceptions, none of which deal with this specific issue.

OK, I understand.
Sorry, I don't know about the code requirement.

Yeah, and that's the thing, there may or may not BE a code requirement. I guess if noone can cite a specific code then I should be OK!

Ask your AHJ what they will allow.
Thin plywood (like thwe 1/8 inch 'wood' panneling requires a gypsum backer.
Thicker plywood is usually OK, but localities can ammend/modify the codes as they see fit. They may require 3/4 inch plywood and that would get pricey.