Removing old finish should not be done with sandpaper, if you're going to do it at all (and it isn't recommended). If you have to do it, use a stripping product that suits the kind of finish, and remove the stripping goop + finish ASAP -- don't let it soak in very long, since you're going to want to put the new finish onto wood, not onto chemical-impregnated wood. In general, you'll need to do some light, fine sanding, including wet-sanding (to raise the grain) before you put the new finish on.

But you really should finish the guitar body*, not leave it open to the vicissitudes of weather and wear. You can use very light finishes, not necessarily the high-gloss lacquer or poly-whatever the thing came with, but you need to close the pores and protect the wood. There are hard finishes and soft ones, and the top probably should have a pore sealer applied before the finish, because you are going to put a chemical onto the wood, and wood is porous. The result can be, basically, soggy wood. Don't just buy a couple of spray cans of Zar or some other paint-like stuff. Even with electric guitars, you need to be cognizant of the change to the wood that will result from anything you do.

Go to one or more of the luthier / repairman sites mentioned above, and get lots of advice before you start.

Bob

* Necks, however, can sometimes be stripped down and either left alone, or French Polished very lightly, a la jazz guitarists' wonts. If the back of the neck feels like a good fiddle's neck, you can move around on it very easily, and many people do this modification.