yo.. Sam
reet... there's a lot here so I am not gonna be able to answer this in full in one hit as it were...
have a look in here...
http://www.golfgtiforum.co.uk/index.php?topic=66113.0i like the idea of you fcukign up your grandads car before yours!!
seriously though, sounds like you're making a good start but there are some fundamental errors there
first off... I don't trust this sander thing... is the speed variable? the polishing bonnets from halfords will probably do more damage than good... you need to be looking at stuff like this
http://www.elitecarcare.co.uk/index.php?cPath=69get yourself an old bonnet, door panel or something like that from a scrappy and practice on that before you knacker your grandads car... it takes practice to get the technique correct and you will be able to see if the sander thing makes an improvement or just burns through the clearcoat!! which I am worried that it might!
in short... I would err on the side of caution!
well done on the lambswool mitt... if you only shop in halfords go for the meguiars range in future... it is the only stuff halfords sell, apart from maybe autoglym that provides any real value for money... the meguiars gold class shampoop is ok - ditch the poundland shampoo ffs!!
the best advance that you can make is to clay your car... there is a description in the link at the top of this reply... but remember you need to
at least polish & wax the paint afterwards to get the best results and durability
random watermarks... how are you drying the car? chamois leather? get a waffle weave to dry the car with
if it is a sunny day then either get up early, or move the car into shade. washing and trying to dry the car in one hit while it is sunny ain't gonna be pretty... if you have no other option... do a panel at a time and work from the top of the car down... i.e. roof (wash and dry), windows (wash and dry), bonnet (wash and dry), tops of doors (wash and dry), sills, bumpers and door bottoms (wash and dry)
wrt the polish that was going dusty... sounds like you used too much... less is sometimes more and just getting a light even coating is perhaps better... try using a foam applicator pad and something like the megs gold class wax... this kit here might be a good start for you
http://www.elitecarcare.co.uk/product_info.php?manufacturers_id=6&products_id=263sam, this isn't a particularly cheap hobby... but if you want results you'll have to start using quality kit or you will just be wasting your hard earned and I don't want to see that happen.
have a look at some of the online retailers listed in the sticky and don't be afraid to ask an opinion of a product before you go ahead and purchase
http://www.golfgtiforum.co.uk/index.php?topic=64295.0