Sorry Nikki, your post slipped past me. I must be slipping, letting a chance to rank slip by me.
Actually, I haven't found much info on pegboard. From what I can tell, it's biggets problem is that it is rough (not necessarily too bad) and if unfinished it can release fibres that could cause respiratory issues. If you put a couple coats of Minwax Polycrylic or similar water based finish on it, I would think that would fix any problems. Pegboard is great for ventilation, and as everyone has pounted out .. it's cheap.
I'll keep looking and try to find out what kind of glue is used on it .. that would be the only other problem I would forsee.
Keith