1) People have told us to add water to the paint. Why should this be done?
What will happen if we dont? How much water should be added?

This seals the plaster. The plaster will be very thirsty and will drink the
extra water, leading to less cracking than would occur with an artificial
drying out of the paint film before it is ready.

2) Can we paint straight onto the plaster or do we need to rough it up to
make the paint stick?

No roughing up. Some give the surface a quick sand, but I don't bother.

Go to your nearest Dulux Trade centre and ask for Supermatt emulsion in the
colour of your choice. This is an excellent paint that is specifically
designed for new plaster and allows it to breathe. Apply a first coat of
diluted Supermatt. I use white, as it can cover walls and ceilings
simultaneously and is off the shelf. Then one or two coats of the Supermatt,
doing ceilings first so the paint splatter on the walls doesn't matter. I
normally intend to use 2 coats, but find that 1 coat appears to have already
done the trick.

A roller produces the best finish without horrible brush marks. (Paint
spraying might be better still, but requires expensive equipment and much
preparation).

Christian.