For stabilising crumbly bits I had some success with super-glue (cyano-acrylate) bled into the wounded area, however, it got very hot, I mean; too hot to handle for several minutes, but it did work on a bunch of Czechoslovakian figures. I was useing dirt cheap unbranded £-shop stuff and was pleased to find it didn't cause any white frosting either, and soaked in instantly.
For larger mends you need wood powder (not 'saw' dust, proper wood-flour) mixed with linseed oil, but I think you have to find special linseed ('Boiled'), not the stuff you buy for tennis rackets and cricket-bats! The Linseed will give you the colour of all that German, Czech and Belgian composition.
For a lot of French, Japanes and British composition you will will need pumice, for that whitey-grey look (but you can use PVA wood glue with is kinder and pretty inert), while the US (only a few small companies) used either, but with bull's blood as one of the constituents, theirs is usually brownish.
Antique sites/forums are better for research on this than toy/model figure sites/forums.
Drevopodnik on my Blog
Wikipedia Recipe
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