©2013 Green Building Advisor. From The Taunton Press, Inc., publisher of Fine Homebuilding Magazine.
We're in Austin TX (Zone 2). The house has decent eves (3') but lots of high gables. Our climate is mostly dry, but with some humid periods and rain comes in large, sometimes driving, storms.
Our current wall profile (probably 50 years old) and, from inside -> out:
Concrete block (8") -> Stucco (very, very hard) -> Paint (lead based).
We have some newer sections with just concrete block, parged with Type S, unpainted. These were windows we made smaller.
Eventually we want this profile:
American Clay -> Sanded Primer -> Concrete block (8") -> ? -> board insulation (most likely Roxul 80, but possibly foam) -> 3/4" drainage plane -> mixed sidings (wood, metal, stucco).
So far inside we've concentrated on air-sealing (airtight drywall to attic, top-plates on wall bridged to ceiling (concrete -> wood -> drywall) with 2" fiberglass covered with latex-modified thin set, seems to have worked well).
We've been told that American Clay can suffer and come off the wall if it gets wet. Our advisor (at American Clay retail) asked us if the concrete blocks are vapor sealed on the outside. I'm unsure if she really meant water-proofed, or if full-on vapor sealing is necessary. From what I've read about the Clay online most problems have stemmed from what sounds more like bulk-water intrusion (that would be a problem for any surface) than condensation (from inside to out or outside to in) from either air-intrusion or from vapor diffusion.
Reading Vapor Retarders and Vapor Barriers  again assures me that worrying about vapor diffusion in this wall and in Austin is not worthwhile (no high humidity sources in the house, no pool, no green house). Just get it air-tight and don't worry about it.
This left me wondering about what treatment will be needed at the ? in the cross-section above (i.e. outside the old paint, behind the new insulation). I expected to make it water-proofed, I expect the currently painted areas already are but was considering something like Ardex Ardicoat Plus  especially over the new, parged but unpainted block areas and anywhere there are cracks (repair first) in the old stucco.
Does that sound about right? Any experience with American Clay that might change the general advice?