The Plot Thickens, Or Gets Worse, Which Ever You Want to Choose

I'm still working away at the bedroom walls. While scraping and revealing I uncovered 4 more holes in the wall that is to the right of the window. Both exterior walls have holes, on the inside, where they blew in or had blown by some one else cellulose. I've never seen it done this way, usually if you are going to blow cellulose into a wall cavity they open up a 4 inch hole on the exterior. These hole are about an inch, very small for cellulose to be blown in. More important, and frightening, the water stains on the wall correspond with the 4 holes. I've also discovered that there isn't any plywood between the interior and exterior siding. The envelope for this house apparently goes as follows:
Siding, house wrap, insulation/wall studs, drywall. Is this normal? My theory is that they jammed the wall full of cellulose because the room gets cold, but it's getting cold from the draft floor, crawlspace, and unsealed sill plate. The house is already draft and has a moisture issue. Now the cellulose in the walls is absorbing all the moisture from the crawlspace and poorly vented attic and sweating it out into the walls. Hence the stains and peeling paint. Bingo. Also, they packed so much cellulose into the walls that the walls are bulging in places. This is a disaster. I've decided to stop scraping, patch up what I can, mud it to be even, then I will Zinzer 1-2-3 over everything and repaint it. A more appealing color. One thing I always thought was odd is that the whole house is painted a flat coat of some muslin color, accept the bedroom. It's painted this satin, or semi gloss color that looks the same as the exterior. I'm wondering if he tried to seal the walls up with exterior paint in hopes it would keep the water out and stop the paint from peeling? News flash, sealing the walls will only make things worse because now the water has no where to go. I also figured out, I hope the source of moisture entry causing the mold in the wall at the base board under the right corner of the window. There is some damaged exterior boards outside in the spot near there and when I went to squeeze some silicone into the open area underneath it just kept filling and filling. It might need some expand-foam. And I might need a lawyer.
Until next time!