So, along with the living room, we are also painting the entry and the stairwell. This afternoon, we decide to get going and start.
The first thing we had to do was fix the huge cracks, divots, and imperfections of the walls. Well, we made it worse than it was:

We never should have started scraping. There was paint and wallpaper and paint and wallpaper. Actually, some of the wallpaper was very cool, and I like the color of this paint.
Anyway, this took us about an hour. The walls are totally whack. There are many significant cracks. There is one area where the whole wall bows in. Above the stairs there is an area that has cracks is a square. I started picking at it:

That's CARDBOARD!!! Thick cardboard.
WTF?!?!?!? Seriously.
Anyway, we patched what we could and have decided to go with a textured paint. I'm not a fan of textured walls, but we don't have the money to fix the ones we have, so it is the best solution we've got.