My fiance and I are considering purchasing a townhouse being sold by HEAVY smokers. The stench is REPULSIVE! To give you an idea...EVERYTHING in the unit is covered in a yellow/orange tar residue. After 10 minutes inside you walk out with your clothes smelling of smoke. I have researched very good remedies online:washing residue(from EVERY surface), coat of primer/sealer, paint, new carpeting, and even ozone generaters, etc. My fear is that after all this work, there will still be tar in the ducts and the place will smell of smoke from our A/C and heater use. Its not a matter IF there is tar in the ductwork, because there absolutely is. I was not able to find a clear answer to this and am wondering about possible solutions. I know I am walking into A LOT of work. But the idea is we would get the townhouse for a deal and refinish everything to make it livable and nice. We are first-time home buyers and are eager to roll up our sleeves and put time and energy into our first place. But I need some guidance here. We don't want to get in over our heads. Any suggestions??

Rich - suburbs of Chicago

Get a good duct cleaning company to clean not only the ducts but the cooling coils and fan unit in the furnace system. They have good cleaning methods that will remove the odor from the system. Be sure to get a written warranty from the company that they will remove the odor for good. Not just mask the smell with a perfume which is what a lot of companies do.
When painting use a oil base primer not a water base one. Be sure to scrub the walls and ceilings well before you paint to assure a good bond with the new finish. Remove all draws from the kitchen cabinets and clean well with strong solution of cleaner. There are many good products to remove this from a home. You should also check out companies such as Serv-Pro they are in the specility cleaning business and have the equipment and man power to do this cleaning and sanitizing for you.

Would the topcoat have to be oil-based as well, or is water-based ok?

Water base finish is fine.
The reason for the oil base is that it will not disolve the nicotine. If you use water base primer it causes the nicotine to become liquid and bleed though the primer. By using oil primer it will not do this. Once sealed any type of paint can be used as a top coat.