Here's a pic of the sprinkler water damage

Hmmmmmm....

Definitely NOT one of the better substrates I've seen!

As far as topcoat choices go, a Solid-stain may cost the least.

HOWEVER-
You WILL have to do a very thorough scrub-down. And I do mean that LITERALLY.
* Even with a good cleaning, that siding seems pretty degraded.
* Even with a top-notch stain, the bonding & durability may be somewhat compromised.
* Make sure the cleaned siding is DRIED-OUT!! Check with a dual-pin moisture-tester. Ya wanna be below 15%.

Faron

It looks like textured plywood. It would be more economical to replace the bad panels.
Casey

Yikes! You guys are bumming me out! But thanks for responding.
Unfortunately, If I replace the bad panels, I'd end up replacing the whole thing, and I can't afford that.

Faron79, when you say "thorough scrub-down", should I use a cleaner of some sort, or will plain water do? I've googled it, but I'm finding conflicting info.

Worst case, you will just have to re-stain the beat up areas every year. If you don't have a power washer, then you should scrub it with some stiff brush and then hose it off.

Yes...I mean using a "chemical".
By itself, water is a poor cleaner...
A good Deck-cleaner like Floods Wood cleaner can be used.
You'll have to use something though!

Faron