Old victorian house, repaint the whole house or replace the siding completely ?

[Luis Arellano]

I have this beautiful old victorian house. The exterior needs major work, the paint is peeling and given the age of the house I have to assume there is lead paint.  So far my options seem to be:

1) Scrape old chips + Repaint the whole house.  ~11k.  (+ any wood replacement)

2) Replace the whole siding of the house.  ~34k 

3) Creative option? 

The value of the property is around $550k. How would you approach this decision? I'm leaning towards simply repainting the house, but I'm afraid I will not end up liking the end result. The painter said "Since this home has many areas of large peeling paint the surface after primer and paint will not be smoothed as before will have texture."

Any thoughts?