Progress report for those interested: I worked on one section of the basement wall with OSB panels this weekend: trimmed panels, stapled on frame, sanded lightly, skim coated very lightly with drywall mud, sanded with drywall sanding screen + vac, wiped, primed, and then touched up parts (cut out loosely bonded chips, filled cutouts with drywall mud, sanded again, and primed spots). At this phase it is looking pretty good ... better than I had expected. BUT, it has taken more effort than I thought it would be due to all the sanding, priming, etc with post-finish touchup. It might have made sense to use a more (expensive) finished panel product as some suggested. The wall will be very strong though. One thing that I was not anticipating is that it is very hard to see limited blemishes (skim void fill failures and loose bonded OSB chips) that you might want to fix before priming. So if you are picky, some degree of touchup work will be needed to approach two rounds of surface fill and priming. That being said, it is looking better than I thought: the panel retains a slight texture from the chips below (chips would be much stronger expressed without the light drywall mud skim with post sanding), but nicely uniform with faint, consistent chip texture. Using air gun staples was probably a good decision. Those filled nicely with drywall mud without being visible post skim coat. Filled drywall screw holes probably would have been very visible (round smooth areas in a regular pattern). One has to be careful to keep the drywall mud skim very thin, or you will end up with thicker too smooth patches (which also might not bond well ... I wanted just features and borders lightly filled). Watering down the mix helped with keeping needed power for drywall tooling down.
I will post some pics later with a summary when I get some sections painted. But it is looking like more than anticipated effort to implement, but it is cheap and it should look pretty good, be super strong, etc. So a mixed bag. Probably ok for home DIY without time charges and being able to patiently work on it in short piecemeal intervals for touchup.