I wet-sand between every 3 colour coats, but only very lightly - just a light scuff to knock any high points down - and my colour coats are also very thin to build up a good depth.
Then the clear coats, which are also very thin and wet-sanded every three or so coats. Last sand is with 2000 grit - lightly again - and then polishing begins with ever ever increasing grit values ending up with Meguiers swirl remover and polish. I've found that there's no short cuts to a really great paint finish - elbow grease and the correct technique do the job.
I hasten to add that this is for a painted finish; I'm not not terribly familiar with timber finishes like the lads in here, eh!!