Jason, if you use the proper blades for your project there should never be any sanding needed for the fret work. There may on occasion need to sand a bump down or something like that and people use needle files and some use emery boards if you can get in the area. Water stains do not work well with plywood or any fret worked wood as a matter of fact because it raises the grain. I too use only hardwoods and I am a huge Deft Danish Oil user. I have a container where I pour the oil in and just dip the project. I mainly use natural color. It is not clear but has an amber tint to it but for my projects it is perfect. Danish oil comes in colors but it does get pricey. I do not top coat because being I use hard woods I sand to 220 grit and when dipped the feel is a nice smooth luster and feel. No sanding after is needed. People do paint and some top coat with lacquer or poly. I will let them speak to that.