The watercolor look is MOSTLY from gouache + water. If you try it for yourself, make sure you use it on some paper (or wood) that will absorb the water and the color and be sure to layer it! Whenever working with water based paint, they tend to dry a bit lighter than when they are wet so just go over it a few times after they dry.
As for working with it on wood, it is great! It can absorb a lot of water, never warps, and can take a beating!