Hi David
An object lesson to us all to work in the open air and always do a test area first.
It sounds as though a previous owner and possibly the builder has used a red lead primer, which is something the older members will remember, in its day it was a very good paint on both metal and wood and it is very typically 1960s which of course suits the age of your model, I can recall using gallons of the stuff on narrowboats at my local boatyard during my school summer holidays. 
Thankfully we have safer paints these days.
I suspect that the wood below the red paint will be in first class condition but be very carefull when sanding the wood as you will be raising dust containing all sorts of pathogens, you should continue to work outdoors and wear overalls/mask/goggles.
As soon as you have the hull smooth enough to paint you should apply an all purpose primer that is compatable with lead based paints, this will seal the old paint below a safe surface.
I am sorry that your first restoration project has started as a baptism of fire but this is what can happen with older models, I once came across an old steam model with a bolier lagged in blue asbestos (I have been trained in hazardous materials) so no worries.
Looking forward to seeing your photos (Vinnie will have to press his magic button again)
Have a nice weekend

Paul