If you are wet-sanding with water, then it is always safer to plug the holes. Easy, also in this case since the holes are pretty big. I plug the holes with little rolled up balls of masking tape. It's relatively easy to get back out of the hole and a bit water resistant.
You're finish looks pretty good in the pics even without sanding and polishing, so the first question is whether you need to wet sand at all. It may be that all you need is some polishing compound and to buff it a bit.
Because my finishes are water based and go on with a brush, I start by dry sanding wtih diablo sanding sheets of 250. That would be way to coarse for most finishes that are sprayed on. Anything that doesn't flatten gets some light dry sanding with 350 then 400. For anything sprayed I don't go coarser than 350, and often start with 400 or a maroon pad.
From there I go to a maroon and then gray scotchbrite sanding pad. All dry to this point. One thing I really like about the sanding sheets and the scotchbrite pads is that is that I can blow them out with compressed air, so they last much longer than sandpaper, particularly when dry. All of this might be unnecessary with yours if it is very smooth already.
For the back of the neck, I stop here. I don't do any wet sanding on the back of the neck. I prefer it to be pretty flat because if feels better to me that way. I finish neck backs with satin, but I have a few that I have bought that are glossy. I actually rub those occasionally with a gray scotchbrite pad to make them satin. Just feels better to me.
For the rest of the guitar I begin wet sanding with 600 grit, then 800, 1000, 1500, 2000, 2500, 3000, 5000, 7000. After that i buff with McGuires polishing compound and then turtlewax car polish. As good as yours looks, you might start here unless you have some places that are a little rougher. I try not to get the paper or the guitar super wet, and I add a couple of drops of dish soap to the water for lubrication.
This is not a perfect system... Others use some polishing compounds of various grits between the wet sanding and the McGuires. I also probably don't buff enough... Also people who use solvent based finishes (like yours, I think) don't have to be as careful about getting the finish wet. Water based finishes like mine say they don't re-activate with water...but some do and I am not willing to chance it.
Also many people stop around 3000 grit with paper and go to polishing compounds. I go to the higher grits for the very scientific reason that it's the way McCreed does it... ;-)
The hardest part of the finishing process for me is sanding with my fingers crossed :D I am paranoid about sand-throughs...having done them too many times.
Hopefully others will chime in. Phrozen is a pro, and TD also does great finishes. I use the "how does it look from two meters away" approach.... Which raises another issue. I have flaws in mine. Mostly specs of dust that get caught in the clear. It would be very easy to ruin a finish trying to get rid of flaws that you can only see from close up. For these I try to observe my daughters rule "flaws remind me that it's something I made." I also try not to worry about things in the finish that all my guitars have after I have owned them for a while.... Seems like a lot of excuses, eh? ;-)