We may as well turn the comments into an answer.
What is the proper way to dilute water based oil-modified
polyurethane?
Unfortunately, the official answer from the manufacturers is "you don't". Though some folks have used distilled water and even surfactents intended for breaking surface tension in latex paint (usually for spray application) it is unclear how oil-modified finishes would work with either. My guess is probably not well, but you are encouraged to try on a test piece if you want.
Otherwise, your solutions are:
- Get a wiping poly and use that if this is your preferred application method.
- Review the application notes from the manufacturer and try again.
As for (2) they probably recommend:
- Apply with a synthetic brush for water-based finishes and not a foam brush.
- Wet the brush with a solvent (water, in this case) and shake off excess before using it to apply finish.
- Never shake the finish; stir gently only.
- Don't wipe excess off the brush along the container. Rather, lightly tap the brush a little against the side of the container to remove excess so the brush stays relatively loaded. This may be easier if you transfer some of the finish to another container and use that as your working amount.
- Brush with the grain.
- Apply the finish and move on. Try not to go over these fast-drying polys.
The idea is that we want the finish to go on relatively wet so any small bubbles rise to the top before it dries. Once dry enough, a light sanding should be enough to rough up the surface and remove any small bubbles before applying another coat.
If you read between the lines of the application notes, you can see that since they recommend wetting and cleaning the brush with water, you can probably dilute this finish some small amount with distilled water. Whether or not you should is up to you.