The plan for updating the dark paneling look that was so popular in the seventies depends on the anticipated price range for your house. For more expensive homes, you will need to rip out the paneling, repair or replace the drywall underneath, and then paint. For more modest homes, I recommend covering the paneling in a specialty primer and then painting it. Do not try to fill in all the grooves, because that almost never works out well.
Install a window or two, or even expand the space with one of the garden room kits widely available. There are some inexpensive choices on the Internet. If you followed my earlier suggestion about visiting home and garden shows, you probably have brochures from several manufacturers. Additional lighting will also help.
If the family room is in the basement, think about capitalizing on the dark look and turning it into a media room. I am talking about decorative finishes and labeling only, not wiring and electronics. Paint the walls with an acoustic paint or hang dark fabric panels on them. These are simply eight-foot by four-foot lengths of fabric stapled to wooden frames. Put in thick-pile dark carpeting, put a dimmer on the light switch, and spend $100 on a replica old-fashioned popcorn cart. Call the place a media room and you are in business.