I have no idea what your local costs might be (and I have only ever dealt with roof cedar shakes), but I think the cost of coloring them (stain or paint) is something extra after you've installed them (like paint or stain on clapboard). One of the benefits of shakes is that they can be spot replaced, though there is for a year or two a difference in color with natural or transparent stains), which evens out in the long run. Perhaps since you've just bought the house the PO were doing the repairs in advance of the sale to take care of of any maintenance issues. When I sold my cedar shake-roofed house I had to explain a number of times to prospective owners that the dappled look on the roof was the sign of good maintenance (continually repaired shakes), not a defect. Fortunately I had taken pictures over several years so the doubters could look at pictures and see how the new shakes blended with the older ones after a season or two. However, mine were natural not stained.

Now, if you have peeling paint it can come from several reasons: two of the most likely ones are 1)poor application of the paint (poor prep, inadequately dry at time of application, poor quality paint, etc.) OR 2) because you have moisture from the house leaking out from behind the shakes and breaking the paint bond. Is your peeling related to certain rooms (like kitchens, laundry or baths?) That might be a clue. This should be corrected by blocking that moisture on the inside, and would need to be done no matter what cladding you on, because it will affect them all.

Is enough of the paint peeling that you can let it age off by itself (or help it along by minor abrasion, careful power washing or stripping)? Cedar naturally has a lot of tanins and oils which will protect it: though left untreated, except in certain climates, it will degrade eventually. Personally I really like the look of untreated cedar, but not everyone does.
Molly~