Retrofitting an existing building is a good choice when you consider all the embedded energy and resources that are already in place. In most cases salvaged materials are far more sustainable than many materials commonly labeled ?green.? It is also quite often the case that materials in existing buildings have a higher resource value than standard materials available today. That is true of your poplar boards. At the time they were installed they were most likely a cheap and readily available type of paneling. Fast-forward to our current world of pressed board and veneer products, and the value of solid hardwood, even a common species like poplar, is certainly unique.
I would guess that the separation between the boards was caused by shrinkage as the wood dried over the years. The good news is that at this point the wood has likely reached equilibrium and should not continue to shrink. With the degree of separation that you describe it may be best to remove the boards and reinstall them. One pass through a thickness planer and/or joiner may be all that is needed to clean up the boards and straighten the edges. I also recommend applying a natural oil-based sealer like Osmo to protect the wood. As you reinstall the paneling, you might have to "donate" the wood from a small wall to fill the extra space created by tightening the gaps.
I am less inclined to promote the idea of filling the gaps with sealant. Most sealants contain silicone or urethane, and they shrink and crack over time. Sealants are no substitute for properly fitted joints, and there really is no sealant that I would recommend in a residential application that can fill a one-inch gap.
In the areas where you run out of coverage, you have many choices for wall panels. Standard gypsum board is a reasonably sustainable product. You can read more about gypsum board at the Georgia-Pacific and Building Green websites.
Some other products you might consider include Homasote, Woodstalk, and PureBond or Classic Core veneer plywood by Columbia Forest Products. While plywood is certainly more expensive than gypsum board, it is virtually ready for finish once installed. It requires no taping or sanding, allowing for considerable savings on labor. I have used plywood as an alternative to drywall with great results. It is not only beautiful, but also much more durable than drywall. Both the Woodstalk and the veneer plywood should be finished with a natural oil-based sealer like Osmo.