Without seeing what you are working with it is hard to asses a path.
I think I would trim out the hole and start from scratch. Since you mention water damage, I imagine that this trailer is not of concourse quality.
You should be able to find a piece of wall board the you can cannablize perhaps inside a cabinet. Also I would find some self stick wallpaper or vinylcover that would co ordinate with what you have.
But that is just me, Frugal and always function before form.