If less than half the old paint is left, however, it may be worth stripping it all off. Guertin gets rid of stubborn remnants using shrouded grinders (like the PaintShaver), infrared paint strippers (such as the Speedheater), or chemical strippers (like Multi-Strip), then smooths the wood with a course or two of sanding. When siding (or bank accounts) can't take the shock of a total strip job, Rich O'Neil, of Masterwork Painting in Bedford, Massachusetts, has successfully hidden rough, well-adhered paint under Peel Bond, a thick primer.
Oh, where to begin? Let me start with 'watered down paint'. 25-50% before the material gets to the site? Impossible. You would basically be painting with water at that point. It would be less of a hassle, and cost, to simply use proper material. You would be forced to apply three coats instead of two, as the coverage would be horrible. Whatever cost you think might be saved in materials would be lost in labor.