Depending on what they put in the stucco, there's a chance the building paper has disintegrated. What sxtasy said though frame up that dead valley and shingle it to prevent water from sitting there. I'd bang out all that parging and install wall flashing up the along the house and flashing under the bottom of the chimney. You'll want to pull the shingles out as well. Don't worry though, if they're BP they probably not sticking down so they'll be easy to remove.
As for the paint. Make sure it is a breathable elastimaric paint or you'll be dealing with problems. STO silco lactic is the best stuff for painting over stucco.
And you don't want to install flashing over stucco. You really want to remove the stucco, install flashing directly against the house, then stucco patch over it ir you'll be dealing with moisture getting behind the flashing as stucco.
There are a number of stucco and roofing guys that deal with this type of stuff and can do it for you as well
That's a good doable project.
I'm a baller on a budget, I'll do a project and come back and tear the outlet mall up.