I don't thin down my icing for crumb coats, I just ice the cake and then scrap the majority of the icing off with the side of the icing spatula, so that you end up with just a very light coating on the cake. But then I use Italian meringue buttercream rather than powdered sugar/crisco based icing, IMBC is lighter in texture. When you do that, as you scrape off the excess icing, put it into a separate bowl, not in your bowl of fresh icing. You don't want to get crumbs in the original batch of icing, save what you have scraped off and you can freeze it, thaw and use for another crumb coat.
You didn't say in what way your cake was ruined, was it too soggy? It may have absorbed too much moisture when you thinned the icing. If you feel you have to thin the icing I would use water, not milk. I think the water would allow the icing to crust, the milk might keep it too soft.
I crumbcoat with the exact consistency that I ice with too. I don't know why your thinned icing would ruin the cake tho...since alot of people spritz their cakes with a simple syrup solution that is VERY wet! Maybe your cake texture is not as dense as mine. I add more eggs and oil to get a heavier cake. Might think about that too???? Good luck! Alot of trial and error in the perfecting of these cakes!!!!!!!!!!! Hang in there!
I'm with Shirley, I don't thin down my icing before doing a crumb coat. I do use "regular" BC with shortening. I just use the thin consistency I would normally use to ice my cake, separate a bit from the main batch--yeah, don;t want crumbs in there... 
I thin just put on my crumb coat. But it is rare that I do a crumb coat anyway. I usually only use one for sculpted cakes. WIth my normal cakes, I just use the icer tip and there is no need for a crumb coat.
Quote by @%username% on %date%
%body%