Since you will be residing, take the opportunity to be sure that the tar paper or other weather resistive barrier (WRB) is properly installed, or better yet replaced. Be sure that all windows and doors are flashed properly, with WRB lapped shingle-style over flashings. If you go the route of cedar siding, do it over a "rainscreen" gap, provided by furring strips, to give you an air gap behind the siding, with screened vent strips at top and bottom. This will give you rapid drying of the back sides of the siding, prolonging the life of the siding and any paint applied. Note that if you go the vinyl siding route, that material has cavities behind it, sort of built-in rainscreen gap.
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