Linseed is a natural preservative, which makes it ideal to use as a sealer for raw wood siding. Unfortunately, the very same properties make it difficult to apply paint once the sealer has had time to soak into the wood. However, even though it is difficult to paint on afterward, the added bonus of preserving the wood against rot and other issues can be a long-term benefit that is worth other inconvenience.
Because linseed oil acts as a natural moisture barrier, you have a limited selection of paints available to you once the raw wood siding is sealed. Water-based paints will not stick to an oil base, which means you are limited to oil-based paints only. Acrylic paints will sometimes stick to oil, but it depends on the brand and the amount of acrylic polymers in the paint, and it is not recommended because the layer of acrylic can force mold and mildew between the surface of the wood and the paint.
The drying time for linseed oil can be prohibitive in terms of painting your outdoor wood siding. In ideal conditions linseed oil will cure in a matter of days, but it has to be extremely dry and hot for this to happen. Normally linseed oil takes weeks to cure, and humid or cold weather will extend this time. As a result, while you might want to seal with linseed oil before you paint, keep in mind that your project duration could be extended for a few weeks, depending on the climate.
Preparing linseed-sealed wood is mandatory for painting afterward. Linseed oil tends to make the surface of the wood gummy with time. When you initially seal the wood be sure to wipe it down with a towel 20 minutes or so after your initial coat. After it has cured, you will need to sand down the entire surface of the siding prior to painting to remove the gummy coat of the linseed oil.