What is the relation between an airplane's altitude and the drag it is experiencing?
Yes, it does - skin friction increases with an increasing altitude.

The mechanism is linked more to temperature than to density, but the reasoning in your question is correct. There might be a few cases where viscous drag increases with Reynolds number (like laminar airfoils which lose their laminar bucket when the Reynolds number goes up), but in general the observation is true.

First a plot from Sighard Hoerners book Fluid Dynamic Drag:



Flow properties over altitude, from page 1-11 in Fluid Dynamic Drag, 1965 edition. The ratio of the actual Reynolds number to the Reynolds number at sea level $\frac{R}{R_0}$ shows a clear downward trend over altitude (which is plotted on the x axis). At 60,000 ft the Reynolds number at the same flow speed is only 12% of that on the ground. If you look at the same dynamic pressure, you have to correct that by the square root of the density ratio $\frac{\rho}{\rho_0}$, which is 0.3 at 60,000 ft. In total, the aircraft will fly in 60.000 ft at 40% of the Reynolds number at sea level when the dynamic pressure stays constant. Lift is proportional to dynamic pressure, therefore it is best to keep the dynamic pressure constant for the comparison.

Now for the viscous drag over Reynolds number: From the same book I copied a plot of lots of experimental data which shows the trend nicely:



Skin friction over Reynolds number, from page 2-6 in Fluid Dynamic Drag. Note that both axes are logarithmic to produce a nearly linear trend line. k denotes a correction for a flow which starts laminar but then turns turbulent when the critical Reynolds number is reached (critical = kritisch in German, hence the k).

For even more details I recommend this page from Stanford.



EDIT:

Your comments helped me to understand the source of your doubts. Drag and lift are proportional to dynamic pressure $q$, and this in turn is the product of speed $v$ squared and density $\rho$: $$q = \frac{v^2}{2}\cdot\rho$$
Reduce density, and you reduce drag. But this will also reduce lift. In the end, you want to support the same aircraft mass at lower density, so you need to do something to get lift back to its old level despite the drop in density. You do this by increasing speed. You restore the same dynamic pressure, in other words. Now the drag is also back to its old level, plus some more. Isentropic expansion means that temperature drops when density drops, and the thermodynamic law of isentropic expansion describes what happens to air in the atmosphere (isentropic = no change in entropy). Lower temperature means higher viscosity. Moving at the same dynamic pressure in lower temperature will generally cause more viscous drag.