I have actually done something like carpeting a wall in my RV, putting in some thin carpeting when redoing/renovating some of the cabover area of my class C. I used an inexpensive eco-friendly (i.e. recycled) gray carpet/rug from Lowes, and attached it with contact cement and staples. I had a couple of buckboard sort of things besides the walls, which are removable, and on those I wrapped the carpet over the edges to help keep it secured. (They do have what is claimed to be water-based latex contact cement. It is water based, and so a little neater and rather more pleasant to work with, but in my experience it completely fails at actually sticking things together.)
The advantage of carpeting are that it's warm and fuzzy, and in my case it kind of matches the ceiling material which is a sort of carpeting (but in a light beige color, which I would have preferred if I could find). Disadvantages I can think of are possible difficulty in keeping it clean, which is not so much a tremendous problem in a cabover bed area but would be a big difficulty if used around the kitchen.
It is not at all an unreasonable option on the whole.