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orbit sand with either 320 or 400 grit paper. make sure you get all your edges (like trim, door locks for an example). if you don't, and have shiny parts (like places that didn't get sanded, they can be dull but not shinny) after a few months the paint will peal away in that spot.
nope, you don't need to sand in between coats, or wet sand. you would only need to sand if it has sat for awhile (like a few days or more). wet sanding is only done if you want to make the top coat like glass (clear coat or enamel), remove any dirt, or orange peal
You will need a flat clear. Me and my buddy just finished a mustang in 2 tone flat black with flat silver and it has a flat clear on it. I will get the names of the material used (brands) tomorrow.
Offtopic, but it has a 460 bored out to a 514... drool...