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Cedar shakes are great for accent's. We've done whole houses with them, but usually we will install them in gables and/or on dormers, and use lap siding on the rest of the house. This is my sugegstion to you, since then you both can win.
Cedar shake/shingle on the whole house will cost you alot more than regular lap siding. As far as quality goes, I must be honest and I think the lap siding will last longer. We've replaced 100 year old cedar lap siding before, quite a few times, but I have never seen shakes older than 50 years.
In any case no matter which siding you get, I highly recommend factory pre-stained or at very very least pre-primed on all sides. Do not bother installing base wood siding of any kind. It is so important to longevity, with today's wood, that the back side be primed. Back priming the wood protects against water penetration from behind. Today's wood doesn't have the resins and tanins of old growth cedar which means it's simply not as good. Also pre-staining is great because then you don't have to paint, only touch up your cuts.
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