From the pictures of a bit of the interior wood on your canoe, it looks like simply revarnishing the interior could be fine -- just use a good marine varnish -- that is to say, one with ultraviolet inhibitors. Sunlight is the enemy of varnish, and ordinary varnish will not last a season. Epiphanes is a very good brand, and there are others that are as highly regarded.
Whether to use a satin varnish or not is a matter of personal taste -- I prefer a satin finish because on a sunny day, the glare from a high-gloss varnish job reflecting off the wood of the canoe interior is uncomfortable for my eyes. But if you use satin, use it only for the final coat -- earlier coats should be high gloss -- using satin for all the coats can lead to a somewhat muddy-looking finish.
However, varnishing the interior is one thing -- varnishing the exterior over old paint is quite another.
Varnishing over paint makes no sense to me -- the varnish, even a good marine varnish with UV protection -- will be more subject to UV degradation than a good paint will be. And varnish will change (slightly) the existing color -- most varnishes have at least a slight amber cast to them.
More importantly, varnish will only preserve the existing imperfections in your canoe’s paint -- while not otherwise improving its appearance -- and varnishing is no less work than painting.
Your canoe, while being a very nice canoe, is not a museum piece or a rare antique. There is no value in preserving the original paint. Canoes, like houses, are meant to be repainted, because paint wears out and fails after time. Paint is functional, not just decorative -- it protects and preserves what it is put on, whether a canoe or a house. If you like the existing color, matching it is something any good paint supplier can do.
Painting the exterior will take the same amount of time as varnishing it. Proper preparation for new paint will take only a few additional hours, and will lead to a canoe that looks better, and will look better longer.
So, if were you, I would start by lightly scuff sanding the entire hull -- perhaps a half-hour.
I would then repair the tear in the canvas, no matter what else you do.
You should then do more than simply painting over the cracks shown in your pictures -- they will develop into chipping, even if painted (or varnished) over. New paint is only as good as what is under it, and new paint (or varnish) will not glue old paint down. You should sand those cracks as smooth as possible without going into the canvas if you want to minimize the cracked appearance -- maybe another half-hour or hour of work.
I would then apply spot putty (Bondo spot putty -- not the 2-part Bondo used to fill dents in fenders -- is available in auto parts stores) over the seriously-sanded areas and sand some more to smooth -- and the area of the canvas repair might also benefit from spot putty and sanding. Spot putty can be sanded and painted over in less than an hour after application.
It’s not totally clear from your pictures, but in the last picture of one end of the upside down hull there appear to be a couple of areas of chipped-away paint -- on the bottom next to the keel and on the stem next to the bang plate -- where the paint is completely gone and the filler/canvas is exposed. I would pay particular attention to these areas, removing all loose or chipping paint and then applying spot putty and spot priming with paint. Varnishing over these areas will not improve the appearance of the canoe at all.
(Indeed, this picture makes me think that the existing paint is not in as good shape as you may think it is. Exposed filler/canvas is a pretty good indication that the old paint -- all of the old paint -- is on its very last legs. I, for one, would like to see pictures of these areas taken much closer up.)
I would also paint over the aluminum bang plates that wrap your stems and run along the keel. As the name suggests, bang plates are there to take some punishment -- if painted, touching up chipped paint is easy. Varnishing will do nothing to improve the existing appearance of the bang plates around the stems and will not protect against further chipping -- only paint will make them look better (unless you are going to go to the trouble of removing , stripping, and then reinstalling the bare-metal plates). In any event, there is no point in varnishing them.
The hull is then ready for a coat or two of new paint.
Done this way, you will have a canoe that will look fine for several years, and any dings that appear can be readily (and nearly invisibly) touched up.
If you slap a coat of varnish over the existing paint and canvas, the appearance of your canoe will only deteriorate as it is used, and it will be impossible to touch up the minor blemishes that always develop.
A coat of paint is no more time or work than a coat of varnish. Proper preparation for paint will takes no more than a couple of hours, perhaps spread over a couple of days/evenings. New paint with proper preparation will result in a hull that will look good for several years, and which can be readily touched up. A coat of varnish will not improve the existing appearance of the canoe, will only deteriorate as the canoe is used, and cannot be touched up.
(And if, as I suspect because of what looks like chipped-away paint next to the keel, your existing paint is actually at the end of its useful life, going this route will get you at least a couple of years of use with the canoe looking pretty good as further serious chipping occurs -- until you decide that recanvassing, not just repainting, is called for.)
By the way, was the black mildew on canvas or on wood?
And even if you don’t want to do any prep work, painting makes more sense than varnishing -- it will cover existing problems better than varnish.
For more about dealing with old paint, you might want to look at the following discussions on these forums (most of which deal with old paint seems worse than yours may be):
http://forums.wcha.org/showthread.php?t=5790 see pp. 2-3 of this thread
http://forums.wcha.org/showthread.php?7769-Painting-over-existing-paint&p=41339#post41339
http://forums.wcha.org/showthread.p...t-Restoration-advice-please&p=32358#post32358
http://forums.wcha.org/showthread.php?7775-Temp-repair-to-bare-spot-on-canvas&p=41357#post41357
http://forums.wcha.org/showthread.php?7619-time-is-not-on-my-side!&p=40689#post40689
http://forums.wcha.org/showthread.php?8564-Smoothing-Canvas/page2 starting at post 12, on bondo spot putty
http://forums.wcha.org/showthread.php?6607-sanding-or-not&p=35286#post35286
http://forums.wcha.org/showthread.php?8906-Repaint-Tips
Greg