I checked out the BP directory and there are PMs for almost every state - except Florida.  

depends, I always preferred drywall as opposed to paneling but if the paneling is over plaster and the plaster is in terrible condition removing the plaster and installing new drywall can be a nightmare you may have to rewire and replumb the whole house if you are getting inspections done, so take one room or even one wall at a time, if you feel at that point you can do the rest of the house then go for it, it's also an affordable thing to sub out, you should be able to pay someone $10 per sheet or less to hang and $10 a sheet or less to tape and spackle depending on how many sheets you need done, keep in mind a sheet of drywall cost around $10 a sheet also,  you can also remove the paneling and do a drywall venere which is a thin sheet of drywall over the plaster basically just like paneling except it's drywall.

The answer to all your question is yes. except the last one which is answered in the link I provided.

From what I've learned, because the house wasn't in service for all of 2012 (except for the last two weeks), I should take the fix up costs, my fees at closing, utilities, and insurance and capitalize these.

Even if you figure one out, many lenders don't know and/or don't care about the exceptions, like being able to obtain a second FHA or rules for more than 4 mortgages, etc.

All of your tips are a great help except for Bandit signs.

I guess I can do it that way with the exception of the one she's currently living in.

Property will ALWAYS be free and clear except for lenders Note.

I've never used them except to kick the tires.

As she said, you are letting your contractor control you and your project -- that's not good for anyone (except maybe him).