leaky,
Sounds like fun - hope your name-de-plume is the only thing that lets in water!
In an ideal world we might give all wood, expecially balsa a coat or two of sealer before building it in, but I think that most people don't bother.
Glyn Guest doesn't even proof the inside of his - all balsa craft, but allow them to dry naturally after each sail.
If you are going to give wood a sealing coat then sanding sealer, varnish, polyurethane varnish or my favourite - acrylic varnish are all good.
I would suggest applying them with a bit of rag or tissue and just giving the wood a light "wipe". Applied this way they are dry in a few minutes. The first coat is "hairy" and raises the grain - so a light swipe with blunt sandpaper makes it nice and satiny.
I'll lay a hefty bet that the massed ranks of the Mayhemmers would like to see some pics of your lobster boat
andrew