I'm not saying that it won't work, and I know that many smiths use it. I am saying that leaving the canister uncoated is a better idea. To explain read on....
The issues about why not to use White-Out, and the benefits of not using it are:
1) White-Out requires COMPLETE drying before adding any metals. If not, it will migrate into the metals and prohibit welding. Even if the migration is only a small distance, this will create a path for cracks to form in later drawing out of the billet. Kilz is a thicker coating of the same type material containing titanium dioxide. Most folks put it on and soon after start filling the canister.
If you used one or the other and let them fully dry (6 hours to overnight) they will work, but the canister without a coating is actually better ... read on.
2) You weld the entire billet up and draw it out before doing anything to the canister. The can gets thinner and thinner as the billet is solidified, welded, and drawn out. This end up with a very thin layer of soft steel to grind off in cleaning up the billet.
3) If the canister is solidly welded to the billet that indicates that the billet is solidly welded together inside, also. This means no chance of opening the cannister too soon and having to restart the billet over again.
4) Because the canister stays on throughout the entire process of welding and drawing out of the billet, no oxygen reaches the billet during this process. This ensures the billet to be decarb and scale free and as dense and fault free as possible. It also prevents scale being forged into the billet during drawing out causing flaws and cold shuts later on.
5) A few minutes on the surface grinder or on a flat platen with a 36 grit belt will remove all the remaining canister from the flats, leaving a good surface to inspect and start forging your blades.
Normally you don't even worry about the edges as they will grind or saw away in the profiling.
6) For those who want to slide the billet out before drawing significantly (as in mosaic damascus), using a HT foil liner will make adhesion of the canister much less likely. Use new foil for ease of folding inside the canister. It is only a few cents worth of foil. If you use a standard size canister, you can pre-cut a stack of liners, put them inside, and the canisters are ready whenever you are. A flat piece of wood helps smooth the foil inside the canister.