Will, or is, the siding painted or stained or will it be natural,
untreated?

If left natural and untreated you will probably be OK although not
ideal in my opinion.

Is the siding is goinng to be stained or painted (I recomend stained)
then you should treat all 6 sides before its installed. (Have some of
the stail available to the installer to creat cut ends. This will also
make it much less water permiable and I would be even more hesitant to
install it over soaking wet tar paper.

I had good results with Sikkens Cetol 123plus on my cedar siding. I did
the step 1 on all sides before install then finished with the 23plus
steps after installed. It was installed over a dry substrate though.
The sikkens product I used was natural. Its also available in solid
color or semi-transparent IIRC.

So, to boil it all down. 1, I would wait till it dries to install and
2, prestain all sides before install.