It depends upon what you are trying to accomplish by wet sanding. If you are smoothing out bodywork (after using a grater) to prep for painting or stripping paint, start with 320 grit. If you are sanding primer or paint to put a new coat on, I usually use either 500 or 600 grit. If you are sanding a finish coat to remove orange peel, you can start at 600 (be VERY careful with the pressure) and then go up to 1000 or 1200 for final sand before polishing compound. One thing I would recommend is to use a sanding block of some kind. Flat for the large flat areas, or a flexible one for the curves. If you use just your hand, you won't get as smooth a finish since your fingers will apply uneven pressure to the sanding surface. This is especially true for plastic pieces.
If you are sanding around edges, you are better off sanding up to the edge from both sides, than over the top of the edge. When you sand over an edge, you almost always will strip the paint completely off the edge before you get the adjoining surfaces where you want them to be.
Another thing I do is use a running water supply instead of a bucket. With a bucket, you are bringing contaminants back to the sanding surface when you dunk your sanding block. With a hose, you are constantly removing the sanding contaminants.
Also, soak your paper in water for an hour or so before sanding. This helps soften the paper up so it conforms better to the body panels (If you are doing curved surfaces), and keeps it from creasing.
