Remove all baseboards, crown molding and chair rails before beginning. Use a flat-head screwdriver to pry them out of the wall. It's okay if you scar the wall because it will be covered, but be careful to preserve the woodwork that you want to re-use.
Wipe the wall with a damp rag to remove dust, dirt and grime. Allow to dry thoroughly.
Apply one even coat of wallpaper primer, which goes on just like paint. This provides a good substrate to which the spray adhesive can stick.
Cut strips of cotton batting to the vertical length of the wall and spray one side with spray adhesive. Leave a 1-inch, adhesive-free area on edges that fit next to the adjoining walls.
Allow to dry for 30 seconds, then stick the batting to the wall like wallpaper. Apply the batting as smoothly and evenly as possible. Butt pieces up against each other and spread the top layers to cover the seam.
Determine how the fabric will fit your wall. Craft-store fabric is usually 48 inches wide, while decorator fabric may be up to 84 inches wide. Either way, you'll probably need at least one seam but lay it out for minimal seams.
Cut the fabric to the vertical length of the wall and sew pieces together with a straight seam and matched thread. Sew with wrong sides facing, then open the seam and iron flat. Don't finish the seam or it will look more obvious. Continue in this manner until you have a piece of fabric that fits the wall from top to bottom, with an extra 2 inches side to side. Roll the fabric vertically, wrong side out.
Spray the first strip of batting and a small width of fabric with adhesive. Allow to dry for 30 seconds, then place the free edge of the fabric at the corner, overhanging the edge of the batting by 1 inch. Roll the fabric smoothly across the batting until you reach an adhesive-free area, apply more adhesive and continue rolling. Continue in this manner until all the fabric is on the wall.
Tuck the overhanging fabric on either side under the free edge of the batting and affix with permanent fabric glue.
Tape a large sheet of heavy plastic over the fabric so that the fabric is completely covered. Use a marker to map out your diamond pattern. Mark a grid with desired spacing, then mark a dot on alternate vertices. Poke through each dot with a chalk pencil to mark the location of the buttons on the fabric. Remove the plastic.
Position an upholsterer's button over the chalk dot and gently tap into place with a light hammer. The button will finish right up against the drywall with raised areas in between, and you'll have achieved your tufted look.
Reinstall woodwork and spray the wall with fabric protector.