I use this stuff all the time. My gear is a bit older than most, I guess. For general seam sealing, a thin coat of three or five to one is a good mix. Too thick and it won't penetrate folds and threads. And, thicker stuff has a tendancy to peel.
As far as peeling goes, if the skin (after drying) has a greater adhesion to itself than the fabric, it will generally peel. A slight loosening of the coating will result in the entire stripe being pulled off, eventually. Theis is often the result from abrasion and rubbing on floors and side walls. This is a pretty clear indicator of too thick of a coating.
Most tents & tarps will start misting after 30 uses or so. Some fabrics, especially the older stuff, are very suseptible to UV damage. This can cause areas to whiten, leak and mist in extreme cases. The new stuff is worse than the older stuff. I think the coating is thinly applied. After using tarps for a few years, I have found that they really only need very thin coatings to restore them...at least till the fabric gets soo weak it starts fraying & tearing easily. I use a 20-50 to 1 mix. This is painted over the whole surface, working it in to the fabric on both sides. This seems to stop any misting and after several years, does not peel nor add significant weight. If done correctly, it will add maybe .1oz or .2oz per yard. It will also reseal seams, but flows easily, not really suitable for initial seam sealing.
The silicone and mineral spirits (or white gas) do not really mix that well. Like Eric was saying, it takes a lot of stirring and rather continuous shaking when applying it. And, it will harden, even when diluted. I had extra and let it sit in my bucket (with a lid) and it still hardened after a few days. Though, it remained relativly oily and far less dense than normal.
Having used both thinners, I prefer the mineral spirits since it has a slower drying time than WG. It is easier to do a large area since it takes a couple minutes to evaporate off.