So, I had a similar dilemma, and what I ended up doing was putting in a raised waterproof subfloor (our basement gets puddles on super rainy days occasionally).

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Then we just stapled down some cheap indoor/outdoor carpet (looks better than it sounds), and for the walls, we just made a wall frame kinda thing, put some inexpensive foam insulation, and stapled on some wall panels over the top. Doing that, we avoided having to paint or drywall, and the results look decent enough. Truth be told, I have so many pinball machines, you don't even really see the wall

We didn't even bother to finish the ceiling. On one small section of wall, instead of faux wood paneling, we actually stapled up a darker shade of indoor/outdoor carpet, and use it as a giant pin board. We pin bumper stickers, beer signs, and all sorts of other odds and ends. It's kinda like a poor man's feature wall.

I don't have any pictures on hand of my basement, but if I remember, I'll post them. It really doesn't look bad, and it saved us tons of money.