i have wood all over my tank. it should not be in constant contact with the water though. you can use shelac for sealing the wood. not the greatest sealant, but it is non-toxic. heck it covers M&M's.

it is also used for sealing wooden salad bowls. it takes more to cover surfaces than polyurethan, but it is non-toxic. you could also use the two part epoxy, the thick stuff, but it may be a pain to put on.
my canopy rest on top of the tank. the parts that are right there are slightly falling apart after about 3 yrs. i will prolly replace it in the next year or so.
G~