Drywall – prime/paint these walls

Don't worry about the cracks but you do have to patch where it's crumbly.

Only worry about the paint that comes off easily, no need to scrape down the whole thing.

Depending on the look you're going for, the whole wall would need a skim coat of plaster.

Condemned, eh? Does the roof leak? Did it? (sad face)

If you are going to contract it out, start making phone calls TODAY. You'd be lucky to find someone who doesn't have at least a 3 week back log during the height of summer.

Although difficult to see and you are not sure if you have exposed the base drywall, I suspect what you have is painted wallpaper. The drywall paper rarely comes off easily without taking some gypsum with it. Because you have described three distinct layers, you may have wallpaper that has been skim coated with mud or primer then painted. What typically happens when wallpaper is coated or painted is that the wallpaper paste is reactivated or wetted by the coating put on it. The added weight of the overcoat tends to pull the paper away from the drywall. Short of stripping a large area, you could try using a sharp utility knife and score a square around the area. Then peel to the score which should leave a clean border, hopefully at a point where there is still a good bond of all the different layers. you could lightly sand that border to ease the edge, then apply a coat of mud or spackle. If the area is not too large, I prefer lightweight spackle because it dries very quickly and has less tendency to react with the existing wallpaper, wet it and cause it to separate from the drywall even more.