My memory tells me it was news print and white flour and water that yes, smelled like dough. What we made was seasonal during the school year so we didn't worry about an invasion force.
There are a lot of recipes out there for paper mache. Some use flour and water others add some glue and the ones I remember were liquid laundry starch. I don't remember if we watered down the starch or not. I would think we did and it would go a loooong way.
The simplest paper mache recipe is indeed flour and water. Then there is a "boiled" recipe that uses less flour and dries clear. To inhibit mold in either of these, a dose of salt should be added. As for "critters", mice will nibble on almost anything – cork, wiring, rolling stock – not just the paper mache. I'd set traps, move the layout, or get a cat – one that appreciates my modeled mountain is not just a handy scratching post.
