Paint peeling off layer of joint compound over plaster, am I in over my head?
Don't worry about the cracks but you do have to patch where it's crumbly.

Only worry about the paint that comes off easily, no need to scrape down the whole thing.

Depending on the look you're going for, the whole wall would need a skim coat of plaster.

Condemned, eh? Does the roof leak? Did it? (sad face)

If you are going to contract it out, start making phone calls TODAY. You'd be lucky to find someone who doesn't have at least a 3 week back log during the height of summer.