David,
In section I am picturing studs with the 12 mm boarding on them, and studs with nothing on them at the top. (Does that make sense?)
If I am right, just go with plasterboard..10mm will easily pack out 2 with glue, (I may not be cheap but I am certainly rough!) and you will have both surfaces flush (more or less). There is no mystery to plasterboard, at that height I reckon even I could get a reasonable looking joint!
Use the battens over the top as you suggest, but run one horizontally over the join to frame it all.
Sturdee's shed walls are fine - for a shed

but I think you'll find a bit of movement in 6mm MDF as well, particularly with the back unfinished.
If you are really intimidated by plasterboard, use 10 or 12mm MDF, but that will be hard on your missus, holding it up over her head while you nail it in place! :eek: :eek:
Lastly, fibre cement will work, detailed as above.
Hope I haven't added to your confusion!
Regards,
P