Patch when the board is sound
Localised damage — a hole, a crack, a cluster of nail pops — in otherwise solid board is a patching job. A backed, taped, feathered patch should disappear under paint.
Re-tape cracked joints rather than filling them; the tape bridges the movement that caused the crack.
Replace when the board is weakened
Soft, crumbling, sagging or mouldy board has lost its strength and should be cut out. The same goes for walls that have been patched repeatedly or opened up for wiring, plumbing or insulation work.
Replacing a whole wall or room is often better value than chasing many patches across a tired surface — and the finish is more consistent.
Water damage tips the scale
Water-weakened board should be replaced once the leak is fixed and the area is dry. Stained but solid, dry board can sometimes be sealed and refinished — the only reliable test is inspection.