Begin the installation at one corner of the longest wall. Measure up from the floor to the height you want your wainscot (ours is 35 inches), then use a level (or ideally, a laser lever) to extend this mark across the length of the wall. This line marks the top of the paneling and upper rail. The measurement includes a 1/4-inch gap at the bottom to allow for any variations in floor height.
Remove the room’s existing baseboard and discard it (Image 1). Also remove any electrical outlet covers, but leave the outlets in place.
Use a caulking gun to apply a continuous, serpentine bead of construction adhesive to the wall below the level line, extending the adhesive from top to bottom.
Place the first plywood sheet against the wall (Image 2), even with the level line, and tack it to the studs with two 1-1/2" finishing nails (Image 3). The next sheet should butt against the first and follow the level line. It is more important to maintain a level line along the top of the plywood, even if the joints do not butt tightly together; these joints will be covered by the vertical stiles.
Continue installing the plywood sheets to the end wall. Measure the last section to butt against the corner, and use a circular saw to cut it to fit. At electrical outlet locations, carefully measure and mark each panel before you install it, and use a razor knife or jigsaw to cut out the opening (Image 4). When all of the plywood sheets are up and level, fasten them to the wall studs with 1-1/4" finishing nails.