I have a 3 car unfinished garage. LOML recently gave me a 20,000 BTU window AC for the shop. Here in TX, the heat is so oppressive that the AC isn't going to do much unless I finish in the shop. I plan on putting sheetrock and insulation on the ceiling ASAP. After the ceiling I'll insulate and cover the walls but I am hesitant to put sheetrock on the walls. The only reason for covering the walls is for insulation. I'm not crazy about sheetrock on the walls b/c it is so hard to attach things to the wall (lumber rack, etc).

What are your favorite materials for shop walls? It seems like I've seen some pictures with peg board. What about OSB plywood, which is almost as cheap as sheetrock, it seems like it would be easy to install and better for attaching things to the wall.