Assuming a rooted tree $T$ with vertices $V$, I am maintaining subsets of $V$, for example $M \subseteq V$ whose vertices are associated with particular labels or values. $V$ is dynamic in that it must be possible to insert leaves as well as internal nodes. Deletion is not needed. $M$ can only grow by adding new vertices as they are inserted into $V$ (no existing vertices of $V$ will be added to $M$ at a later point in time).
I need an algorithm that given any vertex $v \in V$ (not necessarily in $M$), it will find the nearest ancestor $u \in M$ of $v$, with space preferably being not worse than linear in $|V|$ and/or $|M|$ and time being somewhat logarithmic in $|M|$. Also the updates should be efficient.
This is known as the Marked Ancestor Problem  and also goes under the names of two-dimensional range searching and union-find problems. The problem with  is that for once it doesn't support insertion of internal nodes, and also it is extremely abstract and I definitely can't derive an algorithm and an implementation from it.
Also in my case, a solution involving Informative Labeling  would be highly desirable.
-  S. Alstrup, T. Husfeldt and T. Rauhe, Marked Ancestor Problems. focs, pp.534, 39th Annual Symposium on Foundations of Computer Science, 1998
-  D. Peleg, Informative labeling schemes for graphs. Mathematical Foundations of Computer Science, pp. 579--588, 2000
Here is another approach, maybe it can be "fixed": I can maintain versions of the tree which are linearized by a total order, one using pre-order traversal, the other using post-order traversal, using an approach developed by Dietz . With these two lists I can query in $O(1)$ whether a vertex $u$ is an ancestor of another vertex $v$ in the tree ($u$ must be left of $v$ in the pre-order list and right of $v$ in the post-order list). If I could organize my vertices $M$ in a way that I can find the nearest ancestor of $v$ in logarithmic or polylogarithmic time, the problem is solved. Right now I can just go through all elements of $M$ and collect the nearest ancestor (closest to $v$ in the lists) in $O(|M|)$...
-  P. Dietz, Maintaining order in a linked list. Proceedings of the fourteenth annual ACM symposium on Theory of computing, pp. 122--127, 1982