Faux Finishing - How to WhiteWash unfinished paneling?

I would like to lighten this soaring-ceiling living room paneling.
http://home-and-garden.webshots.com/...62244511hdboQr

It is unfinished; 40 years old, therefore it will soak up like a sponge any finish applied!

Over the years, the paneling has had some water staining in a few places.

2 years ago, I sanded all the paneling by hand, which lighted it and made the staining much less noticeable!

I am worried that if I just dilute flat off-white paint & apply the water stains may turn black.

Should I seal w/polyurethane 1st, then whitewash, or is there a better way?

Thanks in advance for any help w/this,
Scott

You might want to try lime waxing, you can do a search and find out how to do it. It's exactly what it sounds like, paste wax with colored lime in it. You can even get wood colored wax also. It will give you a much more impressive finish than any paint or poly.

You have a couple of options--a lime based finish might work, but is not a "white wash". I would seal the wood work using a clear wood sealer and use a glaze tinted with white. Then you don't have to worry about the glaze sucking into the wood too fast, and you have the additional advantage of extending your work time.

You can do a wash using a a watered down paint to achieve a "traditional" white wash (I recommend avoiding oil based paints as they will yellow). However, a glaze will give you more working time to insure that there is even coverage.