Oh, where to begin? Let me start with 'watered down paint'. 25-50% before the material gets to the site? Impossible. You would basically be painting with water at that point. It would be less of a hassle, and cost, to simply use proper material. You would be forced to apply three coats instead of two, as the coverage would be horrible. Whatever cost you think might be saved in materials would be lost in labor.
The Lead Renovation, Repair and Painting (RRP) Rule establishes requirements for firms and individuals performing renovations, and affects contractors, property managers, and others who disturb painted surfaces. It applies to work in houses, apartments, and child-occupied facilities (such as schools and day-care centers) built before 1978. It includes pre-renovation education requirements as well as training, firm certification, and work practice requirements.