When stripping paint from cedar shakes, and most types of wood for that matter, you have a few options. Pressure washing is beneficial because it completes two jobs at once: it cleans the wood while stripping away the old finish. A pressure washer that operates between 1,500 and 2,000 psi is best for stripping wood siding. However, if there is significant damage to the siding, avoid using a pressure washer and stick with a solvent, such as mineral spirits, to strip the paint.
No matter which method you use for stripping the old paint from your cedar shakes, you should always sand the wood before you get ready to refinish it. This is especially true if the damage you're repairing is from deep scratches or if the pressure washing process left a slightly uneven surface, which may sometimes happen. Light sanding with medium-grade sandpaper followed by fine-grade sandpaper will get the wood ready to accept the putty and the new paint.
When filling in damage on wood, you would normally try to get putty that is more or less the same color as the wood. This doesn't matter as much if you just plan on painting over it. However, if you plan on staining the wood at all in the future, try to match the putty to your shakes as closely as you can. Scoop the putty from its container and smear it over the damaged area with the grain using a putty knife.
Once the putty is completely dry, you will need to sand it down until it is flush with the rest of the wood. As with sanding regular wood, this is best accomplished by sanding with medium-grade sandpaper followed by fine-grade sandpaper. Before you start painting, wipe away the dust with a wet rag. With the damage fully repaired, you can finally coat the wood with primer, paint and wood sealer. Always use products formulated for exterior surfaces to protect your wood from UV rays and moisture.