Your best bet for sanding is definetly a Dremel with a sanding wheel.....but if you dont have one yet sandpaper will do the trick, just make sure you get a few different grits, this way you can get the feel your going for.
I still don't have a dremel and I've been doing fine Washing and sanding does the trick most of the time, I just have to get some better quality paint whenever I want to make a "professional"-looking custom. And thanks for the tips :]
Where are you looking for a Dremel at? I picked up a cordless Dremel at Wal Mart for $20. As far as primer goes I never use one Just make sure your figure is clean. For a sealer I pick up one from the craft department for $4.00 it comes in either gloss or matte.
I posted this about 2 years ago and I still haven't bought a dremel (because I haven't really been looking for one, heh). I haven't come across a problem that requires it! I usually find a way around any complications. But $20 for a dremel is great! It beats the $40 for the ones in hardware stores.
One of the best things about the Dremel is the engraving piece. You can really get in and do some wicked awesome detail with it. For instance on cables arms all the metal lining comes out a lot smoother with the engraver.