Sure - you can paint paneling... in fact, some of the paneling in the kitchen in that place has been painted. It works fine to paint it.
As for the ground, it's variable there... most of the soil here is sandy, with some bands that are a little rocky and compacted where cars have parked. But a garden can definitely go right in the ground... probably easiest to rent a rototiller to churn it up.
I keep forgetting that things like rototillers exist. Woulda saved me a lot of trouble at the house! Not that I had more than a few feet (literally) to rototill.
Do they rent 'em by the weekend or something? Are they pretty easy to use?
And if the paneling could be painted...well, that makes a difference! That was the first thing that hit me about the pictures. Sad, I know...but like I said, I had some in the house that was NOT in good shape (buckled and cracked in places), and it took me ages to get it out. So it didn't have happy associations for me. ;-)
But if the whole place could be redone in cheerier colors, it could look pretty nice, I think!