Western red and Eastern white are excellent choices for outdoor wood, the latter being hard to find outside of the northeast. If you have the money, teak is even better. I've also heard cypress holds up well. Eastern red cedar (the aromatic kind) is worthless for anything but closet lining, and will not hold up to outdoor conditions.
Keep in mind that cedar and teak forests are often poorly managed (see the latest Audubon magazine), and you should try your best to get wood that is "certified" to come from sustainably managed forests.
I've heard that you should put at least _some_ finish on pretty much anything that goes outdoors. A thin coat of spar urethane, maybe? Anyone have any comments here-I'm thinking of making some outdoor furniture myself.
A few years ago I made Adirondack chairs from 5/4 treated deck lumber. I borrowed one disassembled it to traced the boards. After a few experiments the design was tweeked a little. The disign now has a curved seat,concave and convex, with additional slats and a curved back. One version has been stretched into a love seat. I was selling chairs for $100 with footrest. The chair plan used two 16 foot boards. I think the origional disign was the one Norm Abrams compiled from different chairs and then made on the New Yankee Workshop a few years back. The changes I made were to raise the back so a six footer can put his head back against the back. I shortened the seat so a 5 foot 5 wife could sit with her back against the back and not have the back of her kees against the front edge. The chairs were assembled with deck screws. If you are going to have to stain the chairs you might as well use treated lumber. It's cheap and at 5/4 thick is strong and durable. I was able cut them out with a bandsaw, radial arm and table saw and assemble them in 2 hours.
I recomend using Sikkens deck stain for a glossy furniture like finish. The finish makes them easy to wipe off. If you don't use them for a while they collect heavy dust and must be cleaned before company can use them. Keeping them under roof in the winter will insure a long life.
Good luck with your chairs. They will be a big hit.