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If the drywall has swelled, or the paper backing has cracked or become moldy, then you should replace the damaged sections of drywall. If the drywall is still dimensionally stable, has no cracking or swelling, the paper is undamaged, and there is no mold, it is okay to keep in place. Be aware that you may have to use a stain block (e.g. "Kiltz") where nails or screws are, since they may of generated rust stains which will bleed through new paint.
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