The operative words in this whole conversation is 'With WATER based stains'.
It will work with water based stains,but Shellac uses Alcohol as a base, so if using Alcohol based stains it could end it tears.

Also water will cloud shellac, not a problem if you are only using shellac as a base coat, but if the rest of your guitar is shellac finished, and water gets onto it, it will cause spotting of the finish.