I'm probably being ignorant here but i know what dry lining is and i know what lathe and plaster is but the two together i can't picture? have you boarded over the lathe and plaster?
I normally go 1200 on re-decs with walls that are shall we say weathered.
1000 grade or 800 if your walls are flat, 800 if your going to paper
Bare plaster or plasterboard really benefits from a coat of gardz because it seals the porous surface and future proofs you from damaging the surface if you ever pull the paper off, also gives a nice bit of slip whilst hanging. Personally i line vertically if painting but it usually starts an argument if we go down that road, so do what your most comfortable with!