Waterbased paints cure through a process called coalescence. First the water evaporates, then the solvents and the remaining "stuff" bonds together forming a tight thin bond.
Fresh plaster has a high level of suction (ie. it is very porous). The water in the undiluted paint is sucked into the plaster and messes up the curing process. Rather than allowing the paint to "soak" in it ends up sitting on the surface and the water in subsequent coats end up reactivating the first coat. When rolling it is not uncommon to see the original paint being pulled off the plaster or bubbles appearing.
By diluting the paint you allow an acceptable amount of water to soak in whilst having sufficient evaporation into the air.
Using PVA does indeed reduce the suction problem but can create other problems. The paint may soften it. It may prevent moisture in the walls from escaping. the emulsion takes longer to dry, the paint often slides when rolling, more coats of paint may be required. Condensation can reactive the pva further down the line.
Perhaps there are fewer issues when used on pea dashing given that exterior paints are less porous than interior emulsions
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