: I finished mine with Watco (~8 coats) and it looked beautiful, untilI used
: it. I found that the finish wore off very quickly at the roots of the
: blades, where my hands are. I've reapplied it, but haven't had it in the
: water again yet. I suppose if you keep applying the oil, it will
: eventually become more durable.

Watco does tend to fade quickly, but it is actually only the surface returning to the natural wood color. it is not supposed to hold any special finish, thats the point

: On my next paddle (coming soon), I plan to try thinned satin varnish applied
: with a rag, similar to the way you apply oil. This should produce the same
: look and feel as an oil finish, but hopefully greater durability.

You won't get the same feel, as varnish even when thinned will be a somewhat surface coat.