yup. You need to use oil based. Ask me how I know, having just sanded, re-primed with oil and re-painted all the knots showing through the latex primer/paint in my bathroom.

It's fine to go over oil primer with latex paint, btw.

thanks for the reply.

I also recommend covering the knots with shellac.

I agree about covering all the knots with shellac. The yellowing is probably because the sap is still seeping out of the knots.
@deedless: Are you sure about latex over oil? I've actually seen where latex paint has peeled off in sheets, like wallpaper, because it was applied over oil.

Eek. That'll be on our to do list if we go with painted paneling on the ceiling on our rebuild. It almost seems easier to finish it in a light color rather than paint because it's one less thing to worry about.

Ditto on the shellac primer. You will probably have to re-sand all those areas with the knots? remove the other paint/primer. I have this chore to look forward to as well in my bedroom. The white window casings and the baseboards all have yellow spots where the knots bled through. No one told me I should have used primer with shellac. I keep putting it off because it seems like such a big job. ugh.

Luckily when it came time to paint the cream colored beadboard walls in the kitchen I was wiser. So far so good - no bleed through yet after three years.

Wait so, oil based primer, primer with shellac or something combining the two?

Where do you get such a thing - somewhere like Sherwin Williams? The local friendly big boxes have latex primer only as far as I know.

Shellac based primer is what I would recommend. Sherwin Williams has one it's white tinted. You can also buy it from Home Depot, Lowes or probably any hardware store. It'll be a stain/tannin blocking primer that is white pigmented and shellac based.