You could use MDF panelling resembling tonge and groove for three quarters of the height adding a picture rail on top. However this may mean removing skirting and architraves or there may be enough room to butt up to them. This could be painted then you only have to be concerned with a small area at the top.

Rebecca Senyard had an article on 2/5 and there are several other recent bathroom stories that may help...check HOUZZ.. stories.. bathrooms

I wouldn't use putty though. Spac filler perhaps? But honestly, it would take a huge amount of work. If you paint the walls a mid range colour (darker colours hide sins), or at least a fresh coat of paint, add your furniture and style nicely, the rooms would look lovely and those wretched cover strips would become much less noticeable. Why not try living with them for a while and see if you still feel the same?

Thanks ! lovely but would cost a small fortune for a large room.