Mark,

Hopefully someone from the panel world will also jump in here, but this has been our approach to this subject for several years, and so far so good.

There are two basic types of panels currently on the market. EPS (expanded polystyrene) panels are made from heat welded bead base foam bunks which allow moisture and air to move freely (permiate) through the core foam. Urethane (polyisosyanurate) panels are foamed during fabrication which creates a closed cell foam which is basically impervious (impermiable) to air and moisture migration.

It would seem that moisture (and it's effect on your siding) could be a problem for different reasons depending on the panel you choose. If the souce of moisture is from the inside (probably not very likely) it could become trapped behind the siding, if the siding is treated with a waterproof stain or sealer. If the moisture is from outside (rain, humidity, lawn sprinklers) theoretically it can't get behind the finish.

The problem has less to do with how the moisture gets there, than how it gets out. We base our siding recommendations on the concept that moisture will find it's way behind the siding no matter how hard we try to control it. We recommend firring (strapping) the panels before the siding is applied. We specify "roll-a-vent" or something equivalent between the firring at the bottom (to keep wasps etc. out) and at the top to allow the air to move. This is done by holding the freeze board away from the soffit.

Better safe than sorry, particularly if your house is built to last for centuries.