drankin,
From my experience drywall over the existing inside 2 x 4 studs @ 16" O. C. on a 12' run is adequate, and the sheating would not be required.

On your second thought, I do not fully understand your
rosin paper description.
Can you give a clearer explanaton?

the porchguy

Here is a link that might be useful: My link

The structure needs sheathing somewhere to stabilize the frame. The old interior sheathing which I assume is now gone, performed that function. Lap siding does not perform the function of sheathing. If you were to let in some rack bracing, that might do the trick. Plywood as interior sheathing is usually not a great idea, because there will be no acceptable place for the vapor barrier.
This being only a section of the wall span (I take it that the walls continue with interior sheathing in another room beyond this one) it just might be acceptable if the drywall itself is glued to the studs. whence it will become a structural element of the shear panel. But I'm not an engineer and I can't make that determination.
The best case would be to put the sheathing plywood where it belongs (in the modern insulated wall sense) which is under the lap siding on the outside. This would require removing all the siding and most likely the windows and doors.
One last thought: if you affixed 1/2" plywood interior sheathing, THEN used 1/2" spacers so as to provide an airspace between the ply and the drywall, and the vapor barrier resided on those spacers, that IMO would be acceptable. You just need to avoid exterior walls with plywood+drywall sandwiches. The spacers add to the wall thickness but provide the needed gap.
Casey