From what I have researched most recommend something coarser than 1000 . Most I believe say nothing finer than 600, with many saying 400. Once a paint cures it need enough tooth for the next coats to adhere to. Here are some good links:
http://www.autobodystore.com/ms6.htm
http://www.autobody101.com/articles/
http://www.autobody101.com/forums/index.php
Here is a guide from auto body 101
Stripping: 36-80
For metal I use 40, fiberglass or plastic 80 might be called for, 36 grit scratches in plastic can be real nasty. For some plastics that don't sand well consider chemical strippers, be gentle, or go up to 110 or 180. 8" rotary is my choice for stripping.
Prep for filler: 80
No reason to go finer or coarser for any kind of filler that I can see. Often I'll use a grinder to prep for filler, sometimes a rotary sander, sometimes hand.
Prep for primer: 220 dry
Surfacer should fill 220 grit scratches easily, since you don't want to put any waves into the work at this point you'll probably want to use a block. The right way to block sand is in an X pattern, overlapping, never spend time on one spot, be aware of where you're making contact with the piece and for what duration. You can start coarser, 40 if you need to do some serious shaping, but as you progress you should use finer grits and finish with at least 180. This is the stage you're shaping filler in, so I should mention that the best way to do this is clearly with a body file, a cheese grater tool that's used shortly after the filler kicks but before it fully cures. It removes a massive amount of material easy as pie so you can finish with sandpaper. This is also the magic time window to trim fiberglass, do butt joints in cloth, stuff like that.
Prep for topcoat: 400 wet or dry
Minimum, some say you can see 400 scratches, don't go more than 600 or you get adhesion problems. Again, you'll want to use a block, or a sponge on curved surfaces so you don't put waves in the peice with your finger. The purpose here is to either take small imperfections in primer (in which case you can start with lower grits like 220 and work up to 400), or to just provide tooth (just scratch open the surface and you're done). You might want to use a guide coat, a spray can of a contrasting color so you can see all the low spots and keep removing primer till you remove the color (and hence the imperfection).
Prep for buffing: 1500-2000 wet
Don't start with less than 1500 unless you have lots of material to work with or some serious imperfections. Finishing with either 1500 or 2000 is fine cause the buffer can pick it up from there. I guess some guys go way finer than this but I don't see the point. Every once in while you can stop and remove the water with a squeegee, or better an air hose, and pull some light over it to clearly see your work. High spots will be sanded dull, while low spots will remain glossy and reflective. You use light here just like a guide coat. Keep going till it's evenly dull, use a block or sponge never your bare hand. Some use DAs but I don't. Watch out for burn throughs, if you sand through clear coat or through to primer then you've lost a lot of time to fix it.
