To paint or not to paint ?

That is the question.

We are in the process of a home remodeling project in San Francisco's Sunset District. A major part of the job was made necessary by dry rot damage to the front of the house that my current contractor said was caused by poorly installed waterproofing (paper and flashing). He has explained exactly what is necessary to achieve the maximum waterproofing, and I am confident in his ability to do that. We have chosen to replace the existing stucco finish with an integral color finish, and the question is whether we need to paint the stucco. Our contractor (and his stucco subcontractor) say no, because the waterproofing is really achieved by doing the paper and flashing, etc., correctly. Our architect, who is lawsuit-averse, wants the extra measure of waterproofing that paint would provide. Given the cost of painting the front of the house (several thousand dollars), this is not a trivial decision. Who is right? Thanks for your response.

The contractors are right, and the architect is wrong. Water will always penetrate stucco, even if it has been painted. Even though the paint may seal the pores and slow water absorption, in some cases paint will do more harm that good by trapping water against the wall. The most important thing is to make sure the flashing is done well, over the windows, drip edges on roofs, etc.
In the future, if the walls are stained, cracked a lot, or the color has faded, masonry paint can add a fresh look. Flashing is number one. It helps to have a drainage gap at the bottom of the wall, too.
Besides, you can't beat natural or color cement finishes. The do bleed and fade over time.