Kara over at Stonehouse Straw House has an interesting post up now on a terrible experience they've been having with their exterior finish and their interesting (and very nice) solution. They used earthen plasters on their outside walls and under prolonged exposure to some pretty extreme rain the plaster actually started to slough off. Earthen plasters have been around for a long time but in my experience they're mostly used in the southern (read: dryer) states. Despite this some folks have started using them in Ontario, and apparently the maritimes. Earthen plasters are very nice looking, easy (though very labour intensive) to apply, and have little of the health/environmental baggage that accompanies regular lime plasters such as we used. My suggestion, if you like earthen plasters is that you use them on interior walls, and stick to the tougher lime plasters for the exterior.
What I really like about the post though is their solution. They created a board and batten exterior wall that covers and shields the damaged plaster while still allowing for airflow. In the end the solution ends up being just as attractive, if not more so, than the original wall. Bravo!