Pay the money to have Warmoth do it. Firstly, unless you spend a decent amount on specialized tools you very well could run into real trouble pulling the frets out. Add in the cost of glues, wood strips to inlay, a radiused sanding block (unless you want to do it by hand and have uneven dips and rises in the fretboard), and the money to have a tech re-cut your nut/sand it lower (essential for a fretless' setup) and do the setup itself, which is much more important in playing a fretless and much more difficult to do than a fretted setup. Plus consider that all the money you'd be spending on that nice new Warmoth would go down the drain if something goes wrong with it because your home defret would automatically kill the warranty on the neck...
Really, $85 is a pretty low price considering all that you have to do to defret a bass, and an even better price if you want it done "correctly". As for coatings, there are many different types you can use, but I'd recommend
something and not leaving a fretboard bare. I used Teak Oil - it soaks into all but the hardest woods, sealing open pores and "reinforces" the fretboard without effecting the sound like harder substances such as epoxy does.
