I don't see why your plan wouldn't work. I'm not sure about using Elmer's wood glue rather than pva. This info from LePage's website on the differences doesn't seem to justify its use to me:

"Yellow wood glue contains special additives, which impart better sanding and tack values when compared to typical white wood glue. The tensile strengths of both white and yellow wood glue are identical. Yellow wood glue, commonly known as "Carpenter glue", is the preferred choice for professional woodworkers especially when working with pine."

The few times I've used it myself, it just seemed stickier, and was more obvious when drips escaped and dried. 

You could also use cellulose wallpaper paste, if you have access to it. It does seem to be more difficult to find than it used to be. Liquid clothing starch might also be an adhesive to consider. I would stay away from flour or other food-based adhesives, due it it's possible attractiveness to vermin.

But one thing I question using is your plan for using the ceiling texture for the bark. Now, granted, I'm not all that familiar with it, but isn't it more for lumpy texture than grooved texture?

For grooved, textured tree bark, I would use long folded strips of paper (or fabric), glued to itself, then pressed onto the trunk so the ridges are exposed. They wouldn't have to run completely from the top to the bottom. Go to Google Images and type in oak tree bark for ideas. It's quite irregular. Then I might go over it with a thick paint-like material and a brush to fill in some of the more obvious cracks, but being sure to leave a lot of the barklike texturing.

For interest, you might build in some natural-looking cavities, and add some birds or squirrels, etc.

Sue

PVA (polyvinyl acetate) glue is plain old white craft glue. Check around your area, as some places sell it by the gallon. Check hardware and craft stores. Mix it about half/half with water for your use.

If you have access to dry cellulose wallpaper paste, that would be good, too. Mix with water and let it sit overnight, then thin it down to about the consistency of raw egg white.

The mix you were looking at that was probably Celluclay, and yes, it would cost a fortune.

Using paper would probably be cheaper than fabric, and probably just as good. The only difference would be the "rip factor". I would use paper. The newspaper end rolls would probably be just fine.

Try to keep it as simple as you can.

Let the whole thing dry thoroughly (a regular no-heat fan would be good and would speed up the process), paint it, let it dry, and then be sure to seal it THOROUGHLY, with a Varathane type of product, or genuine shellac (which is non-toxic when dry).

Good luck!

Sue

Hi I was going to point you at a thread, projects you are working on by butterbee  and a piece by Flippantmicrobe who made a great tree but sadly most of the info has been removed. however you could look at tree bark page 5 may help.
Sue