Rachel, I have tried to answer some of your questions about shellac vs. varnish in Karens thread below. Floor refinishers like water based poly because it dries faster (and therfore more dust free) and because it doesn't smell. I think that oil based looks a lot prettier and lasts longer. I can see a milky look in any of the water based polys if the light is right. I told you my favorite in the other thread--an oil based poly. It does take longer to apply and to dry. Your floor will be out of commission for a week from the start of sanding until 3 coats are dry enough to walk on in stocking feet versus 2-3 days for water based.
Let us know if you need more info and good luck. Henry in MI