Despite the numerous claims for acceptability of the mixture of lanolin and alcohol I find the following of interest.
I was checking out whether or not "Light Liquid Petrolatum" (Light Mineral Oil) would be an alternative to Lanolin. As it turned out, it is INSOLUBLE in water or alcohol, so scratch that thought.
But when looking at Lanolin in a reference called "Remington's Practice of Pharmacy," under "Pharmaceutical necessities" I found that Lanolin is also called "Hydrous Wool Fat" and is insoluble in water, but soluble in chloroform and ether. There is no statement about alcohol, probably because the usual products are 70% alcohol and 30% water which is not likely going to dissolve Lanolin.
That said, there is an "Anhydrous Wool Fat" - also called Anhydrous Lanolin. It differs from Lanolin in that there is practically no water (hence, "anhydrous"). It mixes without separation in twice its weight of water. It is sparingly soluble in cold alcohol,more soluble in hot alcohol, and freely soluble in chloroform and ether.
My guess is those who use it as described are probably buying Anhydrous Lanolin, so any combination with twice its weight in water (or 70% alcohol) should not produce problems with separation of the liquids.
Another interesting point is Lanolin is often considered a fat, but based on its chemical composition, it is more accurately classified as a WAX. I'd be interested in what is on the container of "lanolin" that you buy -is it labeled "anhydrous?"