OK. As your 5 I will have to figure that you don't have any experience at all.
What kind of sandpaper to get?
To sand wood, buy either the white Flint, Aluminum Oxide (grayish) or Garnet (red). I prefer the Garnet as it seems to hold its sharpness better then the others.
When sanding, if you want to remove wood fast, sand across the grain (perpendicular to the long direction of the stock), but be aware that this will produce deep scratches on the surface.
To remove these scratches and to do any sanding in areas where you want a smooth surface always sand "with" the grain (parallel with the long direction of the stock).
Start your sanding with the rough sandpaper and then re sand using finer and finer grades until you reach a 220 grit. IMO, using sandpapers finer than 220 are a waste of your time because the surface of the woods natural roughness is coarser than that even on a "closed grain" wood like Maple.
After you think you have smoothed the surfaces as much as possible, hold the stock up to a strong light so that the light reflects off of the surface at an angle towards your eyes. Look for any scratches that may still remain. I'm sure they will be there and if you don't remove them now they will really show up after you've applied the finishes.
When your done sanding, raise the grain as described in the post above.
When you are removing the "whiskers" that the water will raise and they have dried, feel them. There will be one direction that feels noticeably rougher than any other direction. Remember this direction.
Use brand new sandpaper and very lightly sand Against the direction that felt the roughest.
This will cut off the offending whiskers. If you sand in the direction that felt smooth, you will only succeed in pressing the whiskers back down into the surface of the wood from whence they came.
You do not want to use any OIL based stains and stay away from any of the Stain & Finish in one step stuff.
You want to use either a water base or an alcohol base stain. The ones recommended above are good and stores that specialize in woodworking also have them. Try to get the alcohol stains as they don't raise the grain like the water based stains will. You can use a pad as described above or a small brush to apply the stain.
Thinning it by the way is a good idea because it allows you to apply multiple coats and "sneak up" on the darkness you like.
Install the inlays or wire inlay after the stock has been rough sanded but before you do the final sandings. You will be filing/sanding the wire inlays down flush with the wood so this must be done before staining and finishing.
The one who must be obeyed says I have to carry in the grocery's so I must go for now.
I'll probably think of more stuff later.