If you want to use hardwoods, I would use cedar. Redwood and cypress hold up very well outside as well. As far as a finish home depot sells a stain/finish that is UV protectant, and comes in clear, cedar, or redwood tint. I can't remember the name of it. I used it on a chair I built for the yard (made from pine 2x's) and used the redwood UV stain. I built it last spring (2009) still looks good and repels water. and it sits out all year long.