I rarely see any tool marks in wood when I am finished turning. I typically get the blank round using a round carbide cutter held at 60-degrees instead of 90 (the tool is fastened to a hex shaft and works very much like Tshadow's Magical Skew). Once round, i switch to a round carbide cutter at 90 degrees until I get very close to the finished dimension. I then take one or two light passes with a square-radiused corners cutter to even things out. I find it very rare that there are any deep tool marks that need to be sanded out. (Although I use carbide, I have heard the same from many turners that use a sharp skew as well).
I typically start by sanding wood lightly at 1000 RPM using 400 grit backed by a flat "acrylic" blank to keep things level. Then I sand inline with the lathe off. I follow the 400 grit with 600 and then with 800 before applying a finish.
On very rare occasions I have started sanding with 320 grit, but it is very rare.
For plastic blanks I do not sand at all - I just do wet sanding using MicroMesh. With MicroMesh however, I do double up on the first, most coarse, grit. I simply have two of those (their number 1500, rust colored ones) on top of my stack of MicroMesh pads.
Regards,
Dave
PS. When sandpaper is pushed across a piece of wood, the abrasive grains cut tiny shavings out of the surface. To the naked eye, these shavings look like dust, but magnified, the are just like the shavings produced by other tools. That is why sandpaper is considered a cutting tool.