I was confused about that aspect too. I think you want that wash water as well as the ash, but that's just a guess.
4- the problem you were having, I think, was that you were adding sand. So far, the clay/ash mixture is holding up better than anything else I've used. As far as how to prepare it, I just mix it together with clay and then add water. I don't break it down, shake, or process it at all. If you've ever cleaned the ash out of your stove and found the ash is very stone like, I feel that's a good thing... I don't try to break that up at all. Those large bits seem to hold up very well.