I have some fuel that had soaked into the wood on the side of my fuselage, used K2R on it and it seemed to get most of the fuel out of the wood, but I still can't get my Monokote to stick to the balsa too good. Can I put balsa rite on it and apply the covering on it then? Is that what this stuff is used for?

Use alcohol, corn meal and heat to try to draw more fuel/oil out of the wood.

Then the balsarite , thinned with acetone and allowed to soak in well, can really help the covering stick to the greasy wood. Balsarite is un-tinted MonoKote adhesive in liquid form (basicly) it is a fuel resistant (nearly fuelproof) paint that also is a heat activated adhesive.

I have had good results just using an alphatic resin (TiteBond II in my case) glue. Put on as thin a layer as you can over the area to be covered; let it dry, iron down the covering. Alphatic resins seem to be able to respond to heat in the same way as the original backing on the covering does.

There are two types of Balsarite, one for film and another for fabric. Be sure you have the appropriate kind. They used to advertise that the stuff would make covering stick to fuel soaked wood. That may be true for very lightly soaked balsa but I believe you have done the right thing so far. Fhhuber has outlined all the necessary steps. Just go from what he says.