Shower head extension

I am removing my old kitchen cabinets and we are installing new ones. The cabinets that are in the kitchen will be removed and I am not 100% sure what it behind them. It looks to be some sort of 1/4" paneling or something like that. Once the new cabinets are in place, we will be installing a back splash. My question is what needs to be installed behind the back splash? If it is this paneling, should I remove it all and install the cabinets directly to the studs and put a cement board where the back splash will go?

This will count as my first post on these forums, so here goes: I'm preparing to redesign my kitchen in my first house. However, it's posing quite a problem. I'm now looking for any and every idea I can find. Take a look at my attachments and let me know what you think. I've had quite a few ideas, but I keep running into problems and I end up having to abandon those ideas. How do you think I should design it? Keep in mind, the wall behind the stove is a load bearing wall, it cannot be removed. However, it can be braced with two columns and a 4"x10". I've thought about doing that and installing an arch in order to hide the 4"x10". Don't be afraid to suggest moving appliances, tearing out walls, or doing away w/ the pantry & closet. I can do all that. However, if I remove that pantry, I need to build a new one somewhere. There's already another coat closet elsewhere in the house. [IMG]http://i2.photobucket.com/albums/y42/bsspewer/062.jpg[/IMG] [IMG]http://i2.photobucket.com/albums/y42/bsspewer/061.jpg[/IMG] [IMG]http://i2.photobucket.com/albums/y42/bsspewer/OriginalKitchen.jpg[/IMG]