Question: Is it better to oil-out or use retouch varnish to restore the luster of paint?

A common practice is to rub oil into sunken portions of a painting, this is referred to as oiling-out. But using oil for this purpose has some risk associated with it. If you're using a flexible drying oil like linseed, it will most certainly darken over time. If you use poppy seed or walnut oil, it won't darken as much but the chance of it cracking increases because they form inflexible films when they dry. Retouch varnish is probably a better choice. Although the varnish will sink-in eventually, it temporarily restores the luster of the paint and will not cause any lasting damage to the paint surface.

Remember that a permanent varnish should be applied when the paint is thoroughly dry, or the dull look will occur again. It also provides protection to the surface of the picture.