I recently removed some old wood panelling in my basement that was up against drywall. I refinished the walls and painted but now the outlet covers don't mount flush against the wall anymore because they were originally installed when the walls had the extra thickness of the wood panelling. What can I do about this?
Presumably the issue is that the outlet boxes protrude from the drywall.
Before doing anything else, turn off the power to the outlet.
Generally these boxes are typically nailed into the studs. If this is the case, simply pry the nails out, reseat the boxes deeper in, and re-nail them into place.
If you can't reseat the boxes deeper (e.g. if something impinges on the rear of the boxes), there's a few options. Replace the boxes with shallower ones. Use a dremel or similar to cut off the protruding parts of the box. Or add a "frame" around the box.
Like it has been said here a few times, remove the old box with a hacksaw or a sawzall. Then you can slide the box off and work the wires through the box clamps. If you can find this style of box it will be easier to use.
As you can see this can easily be screwed in to were the old box was and you will be able to get the box to the correct depth.
Assuming that the boxes protrude (alternatively, the fixtures may be extended from the box -- if that's the case, you can probably just tighten the screws).
Probably the easiest fix would be to make a trim piece out of something about the same thickness as the paneling that was removed. Cut a piece approximately 1/2" wider than the outlet cover (vary according to your taste), and use a jigsaw to cut a hole to match the outlet box (it may be easiest to buy a similar box -- they're pretty cheap -- to use as a template). Paint to match your wall (or your trim color), put it over the outlet box, and install the plate. The plate will hold it against the wall, or you can use a couple short screws (keep in mind that you have wires in the wall above and/or below the outlet box).
If you have access to a router, you could put rounded (or fancier) edges on the trim piece, round the corners, etc.
If you want to get a flush finish (and not hide it some other way) then you are going to need to remove and replace the electrical box. This is not that difficult of a job.
First, turn the power off. Remove the cable clamp(s) as well as the ground wire from the box. Figure out which side of the box is the stud, and pry the box away from the stud enough that you can see the nails. You can use either a hacksaw of a sawzall (more fun, but careful not to cut your drywall) to cut the nails. Now remove the box. You have two options to replace it with. Either you can use a remodel box; these are boxes that have tabs on them that screw in to secure the box into the wall, or you can use a regular electrical box and try and screw it to the stud from inside of the box. First pull the cable(s) through the appropriate locations in the box (you will have to remove the knock-outs) and then secure the box place. Re-attach the ground wire to the ground screw, tighten the cable clamps and replace the outlet. Before you put on the cover, turn the breaker on and test your work. I always like to screw in my outlets before I test them because I've had the side of the outlet make contact with the electrical box and short out.