The bleed is minimal and hardly noticeable. It's one of those things that you know about and nobody else will notice. Without binding, it's very hard to stop something like that happening, and with binding, you have the problem of binding cracks taking up stain. Hard to win!

You're basically applying enough layers of finish to build up a thickness deep enough to sand it back level and then polish, whilst leaving enough thickness of finish to protect the body.

Intermediate sanding is only really about removing noticeable dust specs and trapped hairs from the finish as you go. If you haven't got dust or hair issues, then personally I see no need to sand at all as you'll build up the thickness quicker and you can do almost all the levelling at the final stages.

If the body wasn't flat before starting the finish, then lightly sanding with a hard flat block should rough up the high areas and show the dips as still glossy. You'll almost always get small dips (which I wouldn't worry about until you've got lots of layers on), but if there are any large low areas, you might want to spend some time just applying finish in those layers to fill things up.

Unless the linseed oil is very highly thinned (so the resulting layer is much thinner than normal), it will be too viscous to settle just in the dips and level things out automatically, and it will just follow the surface contours. So it's often quicker to just get as much depth as you can before sanding it all back flat with a reasonably fine grit, say P600, before working up through the finer grits and then polishing.