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Oh hell, that's the paper layer of the drywall you're pulling up. Whoever put up that wallpaper should be shot, you NEVER hang it on bare drywall. Shit like that pisses me off.
But anyway, it needs to be sealed up, Kilz2 works good for that. It will harden the surface into something you can work with. Then it will need to be scraped, skim coated, sanded, probably skimmed again and primed before you paint.
In other words, it's going to be a lot of work. And a textured paint won't hide that much damage. I definitely would not recommend going that route.
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