Whitewash question

I use the old school method, spray a light coat of white over the base coat, leaving the edges free. Then go back with a kitchen sponge dipped in the base coat color and selectively dapped the paint on. The sponge creates the random scratches.

Here's a 1/48 Stug that was done in that technique.

Yes,the pastel+water mix you speak of is covered in the Feb 2003 FSM.The modeler John Robinson uses it on a JS-2.I don't know if you have acess to the article,but what he does  is after the models base coat has cured and the markings have been sealed with flat clear coat,he applies a milky mix of shaved pastels and water with a soft wide paintbrush.He next rubs off some of the mix with a stiffer brush,just trying different pressures and techniques until you like what you see.If you take off too much,just add more of the mixture to the area and try again.Seal the whitewash with acrtylic clear coat.This will diminish the whitewash but just add more and seal again until you build up the look you want,finally weather the white wash.I hope this helps you.

On the few whitewashes I have done, I prefer to do as you suggest in #1, a small brush around #1 size and Flat White paint. It will give the rough field applied look of white wash. I have never heard of method #2 you suggest, but would be interested to see it done.