I have been making war-hammer for a while, but I stopped because of the general price going up hugely. I have just started build my first plane and it is going really well, but on some youtube videos they watered down the paint, and I am not sure if I should and how. Also I am not sure i should undercoat, because when I done war-hammer we undercoated in black and paint straight from the paint pot to the model, but in the 'help' video they did not under coat but paint straight on to the model with watered down paint. What should I do?

It depends on the paint, the model and what effect you're trying to achieve. Many of us apply a base coat of grey or white to make sure that we haven't left any building flaws (they're easier to see when everything's one colour) before we apply our finishing coat. Also, certain kinds of paint (metallics especially) need proper base coats in order to work properly.

I'm guessing that the person you were watching was using acryllic paint in an airbrush. Most paints are formulated for brushing, and need to be thinned down to spray properly through an airbrush. That's where the water comes in. If they had been using enamel they'd have used turpentine or another variety of enamel thinner instead.