Use a primer-sealer and apply it on all sides, including in the tongue and groove, and do the same with one coat of paint. Allow to dry for a couple of days before installing, caulking where needed, and applying your final coat of paint. Beadboard plank will move with changes in moisture level and if you only paint it after it's installed, especially in summer, you will get small amounts of bare wood showing when it shrinks in wintertime. The primer/sealer and paint on the back side will protect it from any moisture that might get back there.

Also add nailing strips above and below any electrical boxes or other interruptions; you will probably need some little square plastic thingies called receptacle extenders to bring the face of the outlet flush to the beadboard.

If there's insulation in the stud bays, 1x2s set at the top, middle, and bottom of the wainscot area will smush the insulation less and therefore your maximum R-value is preserved, and a 1x2 still provides a good nailing surface. You only have to toenail it through the groove, you don't need to nail the tongue. A nail gun is a lot easier than a hammer and nails but you have to be careful not to split the side of the groove that you nail through.

When you put your trim pieces on though, predrill them and use a hammer and finish nails as the trim pieces split easily, as I found to my sorrow.

If you use an adhesive on the back and/or in the groove, use one that remains FLEXIBLE, because as the house shrinks and expands with the seasons it can and will literally rip the wood on the beadboard apart, causing cracks and splits. Most often it is the tongue splitting off the main board. The BANG! as the wood splits will scare the bejeezus out of you, and it invariably seemed to happen just as we were falling asleep!

Stop every couple of boards to make sure you are level and plumb. Get a good long level, like a 4 foot.

I don't know why priming and painting with oil based paint wouldn't be a good idea, but I have noticed that the white oil based paint I have used (Dunn-Edwards) that meets California standards tends to yellow. Your plan for blocking between studs is a good one, just make sure that you put at least one coat of primer on the backs of the boards before nailing them up. If wood is sealed on one side and not the other, it will have a tendency to cup as the back, or raw side absorbs moisture and expands. Gary

Consider the expansion and contraction problem very carefully. In my last house, I put beadboard in one of the bathrooms and it cracked very severely when the weather changed. Johnmari's post is really excellent in this regard. Prepaint and leave plenty of room for it to move around.

I think the charming look is worth the effort.