Kate,
I just recently finished scraping off that old, original wallpaper with the intent to re-paper. I was pleased to find formica covered walls (a Hatteras original) underneath instead of raw plywood. Initially, I had intended to re-paper the heads, but since the walls underneath cleaned up so well, I decided to leave them the solid off-white color that they are, and instead, pull color into there with towels that coordinate with the decor of each head's corresponding stateroom, and curtains that coordinate with the stateroom for each head, as well. I really didn't want to put wallpaper back in the boat unless I absolutely had to. I got lucky. The formica was in great shape, was solid (meaning no seams in the middle of any wall), and with a coat of ordinary car or boat wax, will shine like brand new. Since I'll be chartering this boat, the formica surface will be easier to keep clean and I won't have to deal with peeling wallpaper that often occurs in the heads.
In your case, if a formica skin is not already there, I don't know how easy it would be to install it now. However, if I had raw plywood walls, I'd be covering them in afromosia veneer that matches the rest of the boat rather than any other solid surfacing like formica. That would be my first choice if I were going to put that kind of labor into resurfacing. There are varying degrees of thickness for the veneers that get glued on, just like your other interior surfaces probably are.
Another member, Sky, has remodeled his heads very nicely, including new wallpaper. He has posted some photos which you can find on the forum. I don't believe his wife used anything special other than a vinyl wallpaper like you use in a house's bathroom, and he'd have to say what kind of surface she papered over - given the year of his boat, I'm guessing he had formica skins, as well.
I would imagine that covering a plywood surface with wallpaper, you may need to use some sort of backing or liner to get a smooth finished look, unless your wood is already very smooth.
Remember to take before and after photos!