My daughter and I started to replace the rotted siding on my house and discovered that to my dismay about a twelve foot area of the floor sill is badly damaged by water and a couple of the studs need to be replaced as well. It also seems that the buillders neglected to put any wood sheathing in half of this area (about 22"w x 8' high, I did not go any higher) between a door and window. They put insulation in the walls and then covered it with the particle board insulation and no house warp. The house is about 25 years old.

How do I fix the sill and studs? And is there any reason for the lack of sheathing?

Thank you.

Unless You Have Some Background I Can't Advise You To Try And Replace The Sill And Studs , Due Mainly Beacause This Is Load Bearing And If You Were To Cut The Wrong Thing At The Wrong Time, Someone Will Get Hurt, If You Still Want To Know I Just Answered A Similar Question On This Same Subject You Can Look That Up,
As Far As The Sheathing, Its All About Saving Money, There Is A Big Difference In Price On Regular Sheathing And What You Have On There Now.
A lot Of Time They'll Use The Osb On Corners Of The House And Other Places That They Need To Keep Square While Framing The House, The Other Is Just Fill In And They Use The Cheaper, It Is Actually A Better Insulation Grade Than Osb.

As Far As House Wrap It Isn't Code To Do It, And 25 Years Ago I Think We Were Using Black Paper To Wrap Houses Then,

If You Still Want To Try An Fix It, Send Me A Pic Of The Rott And Ill Be Happy To Give You Step By Step Instuctions Will Alow You To Be Safe While Getting This Done,