You shouldn't be sanding the wood after staining it. If you use a water based stain it will raise the grain and you would just have to live with a little roughness. An oil based stain wouldn't raise the grain so there woundn't be the need for sanding the stain.

Using water as a lubricant is pretty good for between the coats sanding of a finish but you have to use "wet or dry" sandpaper in order to use water.

Shellac is a type of finish that should be sprayed. You can get away with putting one coat on with a brush but after that the solvents in shellac will melt the dried finish so you are more likely to remove the previous coats of shellac with a brush than add coats.

 

I have "researched" this on youtube, sanding the wood after staining is very common. Some stains wont do their work unless the grit is no finer than 150 and so you have to sand afterwards if you want a smooth surface. But I think i need to get a oil based stain as it seems that water based stain does not penetrate the wood anywhere near as good as oil based stain does, and therefore if I sand the layer of stain goes right off. I am considering mixing my dye in acetone, I think this will allow the stain to penetrate pretty deep and not raise the grain nearly as much as water.



I once stained pine and got a pretty smooth surface, the trick was to raise the grain with water and sand before staining. So when i applied to stain the grain did not rise.


Im using the old way of applying shellac by hand rubbing it it in (severall coats). I dissolve shellac flakes in 95% ethanol alcohol and rub it in with a ball of linen using a little bit of mineral oil to keep it smooth. But first ill grain fill it, Ill do this by applying a hand rubbed coat of shellac, let it dry, then mix pumice and alcohol and rub it in, that way the pumice will mix with fine saw dust and shellac and fill the pores of the wood allowing for a high gloss french polished surface.

 

I’ve never sanded stained wood unless I found a mistake I missed prior to staining. All sanding on the bare wood should be complete before staining.

The steps are:
1. Sand to a 220 but no more than 320 grit prior to staining
2. Apply stain
3. Apply finish
4. The finish can be flash sanded or scuff sanded between coats to assure a good adhesion for the next coat of finish and to assure a smooth surface
5. Apply finish (second coat)
6. If more than two coats of final finish is desired, repeat steps 4 and 5 until complete
7. The top coat can be rubbed out after the final finish has dried completely to get the amount of luster or shine you desire.