I live in an 80 year old house with plaster walls. The majority of
walls/ceiling are covered in wall paper with coats of paint on them.
Hence, I am getting cracks, bubbling, areas which are pulling away from
the wall..

What's the chances of the wall paper covering up a problem of old worn
plaster?

a friend of mine told me the best thing to do is to cut out the
bubbles, and spackle over them, and repaint. Would you say this is the
thing to do? If I remove all the wall paper, I am afraid of just have
cracking, chipped walls, hence the reason for all the wall paper. I
remember my grandfather put up wallpaper in his house in the 50's for
this very reason. Isn't there a way to refinish the surface of plaster
(that I will probably I have to hire someone for..)