If we put in an addition - do we need to re-do all the house’s siding to avoid leaks?
Not when done properly.
If you will install the same siding that is currently on the house then no.
You don’t have to re-do all your siding in this case. All you will have to do is to put a transition trim between your old and your new siding. It can be a regular 2x2 wooden trim board or something else. You can use any kind of siding on your new addition after installing a transition trim. It doesn’t have to be the same siding that you already have on your house. If you want to go with the same kind of siding, you can avoid installing a transition piece, just connect your new siding to your old, not in the one continues seam from bottom to the top, but do it in the step kind of a pattern.
Make sure you seal all your gaps with proper exterior sealant, or if it a vinyl siding use proper j-channels and other accessories for it. And you will avoid all those leaks in the future.
Nothing leaks when installed right. The new siding must be the same width and step, then you can tongue it in with no problems. Its best to tear down from the top to your repair. This way you can check whats above and caused the problem.
When tying in new siding, as long as the waterproofing membrane is in tack. In this case, its mostly 60min paper or Tyvek. It should be fine. Also try to not penetrate the barrier.
No, you will not have to completely re-do the entire house.