I have 1/2 inch of plywood under a very high grade of drywall, and I have
no problems (wish it was 1", though).  I don't mind patching the drywall.

I USED to have 1/2" plywood panels covered with a self-healing fabric, hung
on regular drywall walls.  The problems:  1)  a good 1" gap between panel
and wall surface, which made it impossible to hang anything REALLY heavy
2) decades of volunteers hanging art and MARKING ON THE FABRIC WITH PENCIL,
pen, charcoal, anything.  I did not mark on the wall--I slipped a small
thin nail between the fabric and the plywood.  3)  To avoid bowing, whoever
installed the panels made them very narrow.  They eventually bowed anyway,
creating cracks which had to be toenailed together.

I do not recommend the fabric-over-panel solution.

Julia Moore