If the walls are flat I install like Tom suggests. If they are wavy or if maintaining reveals on an inset panel moulding is critical I rabbet the panel into the back of the wainscot frame and staple it in.
I also install wainscotting before I install casing. It's easier to butt a piece of casing up to a panel than it is to fit a panel between two casing legs, wall and leg, etc.
I also install wainscotting before I install casing. It's easier to butt a piece of casing up to a panel than it is to fit a panel between two casing legs, wall and leg, etc.