[drcoastline]

The answer depends on the time and money you want to invest in the job and the end result you are looking for.

If it were plaster I would try and save it. Being drywall it's no big deal to tear it out and re do it. I would assess the over condition of the dry wall first. Any other imperfections? Bad tape joints, years of built up paint, etc. If you remember your joint thread I am a stickler on tape joints so I might hire out hanging the dry wall for speed if i chose to tear it out. But I would tape the joints my self so they are perfectly flat and invisible when finished. Nothing worse then a lump at a tape joint. And I hate sanding and dust everywhere so a damp sponge for me.

For the holes that are just a staple or thumb tack hole I use Dap 33 glazing or 53 painters putty. I personally like the 33. I also use this to fill nail holes on paint grade trim. A small blotch on a finger smoosh in wipe a few time with your finger to push in, smooth and remove excess and it's ready to go. For any of the holes that may have a little of the paper sticking out take the back of a screw driver, putty knife or five in one tool and push it into the hole this will push the paper back in and ever so slightly dimple the hole, then putty. This process is a little time consuming and boring but you and the wife can tackle that room in an hour. Many of the holes will fill with paint when rolling so I would repair only the worst/largest holes, paint the room then go back after the paints dries and spot fill and roll the area with a trim roller.