Here's the link to the WEST epoxy article on reducing epoxy viscosity aka thinning epoxy.
http://www.westsystem.com/ss/thinning-west-system-epoxy/

NB-After using a few different epoxy brands when I started building boats (System Three,Cold cure, EAST) I've used nothing but WEST epoxy for years now, so any comments apply only to WEST epoxy.
Xylene is one of the few solvents I don't have in my shop, but I have used small amounts (5% or less) of acetone, lacquer thinner or denatured alcohol to thin epoxy on a few occasions. Plenty of bad aspects to solvent thinning, as noted in the WEST article linked above. One that they don't mention is that acetone is so volatile that the properties of the thinned epoxy mix change even over a few minutes, so what is in the mixing container is not necessarily what you have on the working surface. Nowadays I generally try to control viscosity with heat - keeping my epoxy jugs at 'room temperature' (20-25C?) and trying to get the working surface warm.

Lately I've been hearing where the Texas racing community is generally partial to the idea of thinned epoxy as a penetrating application to be used prior to regular epoxy, to render wood gunnels, bulkheads, and such as waterproof and rot-resistant as possible. These people aren't casual hobbyists, but serious competitors in grueling races who get plumb scientific about most everything they do. I tend to pay attention to them when they talk (while keeping in mind the differences between dedicated competition boats and more recreational craft).

The WEST research apparently shows that for their product, solvent thinning doesn't increase waterproof-ness. I think that for something like a canoe gunwale which can get surface dings and splinters in normal use, thinned aka penetrating epoxy might be useful. For protected surfaces, I agree with WEST- not useful.

In particular, it seems like just the thing for a seal coat, as thinned epoxy really soaks into wood with something like 10% thinning agent added to the goo (I, on the other hand, seldom get overly scientific, sorry).

One question is whether increased 'penetration' is necessary to do the job of sealing. Also, it's enlightening to let some thinned epoxy cure in the container and check the results. For me, 10% or more solvent (alcohol or lacquer thinner) resulted in a rubbery result.

I believe the upshot was more or less that yes, it works, but the downside is badly degraded epoxy integrity; that while thinned epoxy will wet out cloth like nobody's business, the resulting matrix will never be as strong.

For cloth, it 'looks' wet-out but thin epoxy can 'drain out' of the cloth. I tried solvent thinning when trying to wet-out some tight weave hard-to-wet cloth, and didn't get good results.