Can drywall be installed over lath?
Any imperfections in the wall will be easily visible through the drywall. It will form waves that conform to the surface behind it. When laying out walls in a new build, we make sure every stud has the bow or cup facing the same direction to minimize this. And any stud that is too badly twisted is re-purposed (usually for shorter cripples under windows).

I would recommend taking a long flat surface (either a straight board or a level) and making sure all the walls are flat, both vertically and horizontally. They can be out of level by a bit, but flat is important. If this reveals lots of bulges or cups in the wall, flatten it while it's exposed.

If you find it's not flat and pull the lath, you may still find the studs are not flat. For any studs that have a significant cup in, you can sister a second stud beside it to give a good nailing surface, just be sure it's not on a seam between two sheets of drywall. And if any studs have a significant bow out, you can plane them down slightly (though if you have to remove more than a half inch, I'd sister another stud for structure).

One other consideration, junction boxes for outlets and switches are standardized for installing on studs with drywall, so you'll have an easier time replacing them at the 1/2" depth if you're down to the studs.