How do you prepare wood that water based paint has been painted over oil base and is pealing?

The best way is to scrape it right back to original. If you leave any of the paint on it you wil find that the whole problem may start again. On the other hand you can clean the peeled parts of the job as well as possible then paint the area you treated with masonry glue slightly watered down. Then wipe it down with a wet cloth to remove the excess glue. Allow it to dry and paint over the whole lot with a good quality acrylic paint.