With vinegar, I let it set two or three hours. I have let it go overnight before with no ill effects.
Good mustard is not the stuff to use. Get the el-cheapo nasty no-name yellow stuff. Ingredients should read something like: vinegar, vinegar, toxic waste, salt, high fructose corn syrup, vinegar, cat poop, wheat gluten, mustard powder, vinegar, artificial flavors made from yak anal glands and preservatives.
The paper towel is to keep it from drying too much and let it work longer. Only problem I have had with that is the towel sticks to the blade and gives it the same pattern as the towel. Ok if you like cross-hatching and Hello Kitty clouds, not so much if you don't.