I've been doing a guitar with tru oil, and my chosen method was to lightly sand with 600 (european) after every 3 or 4 coats, with no attempt to take it down flat, simply to take all the high points, runs and dust off - so the surface looks about half sanded, half shiny. I started with one coat of sealer filler on the front then put a couple of tru oil on, but I was concerned that I might not have enough depth so I gently sanded it then put another couple of layers of sealer/filler on before going back to tru oil. I finally took it down flat only after I had put all the coats I wanted to on, and I was quite confident there was minimal chance of going through. I used 600 and 800, then went up to 1200. I then used an abrasive polish, but it was evident that the finish hadn't cured enough for it to burnish to a really high polish, so I'm going to wait a few weeks and give it another go. My feeling is that there's little to be gained by sanding completely flat more than once, and a lot to be lost. I haven't used thinned tru oil, because I trust that the burnish will do all I need for gloss. Thing to bear in mind though I'm not into super gloss finishes, so if you want a real showroom job pay more attention to those that have achieved it...
Your photos do look a bit dusty to me. If you have a dust problem, and I do like crazy, its good if you can figure up a way to hold the work when you've put the oil on to minimise the amount of dust that can fall on it. Even propped up vertically helps. Of course then its ten times as many runs, but who said it was easy?
It's been quite some time and in the meantime I glued together neck and body to let it cure during the Christmas break. Before I did that I checked the neck angle several times by putting one or two strings and checking their height. I then adjusted my shim made out of maple veneer until I liked the result.
After almost a month I sanded the oil finish moooore or less flat, ordered a new bottle of tru oil and started oiling again.
I changed my method of application and am now using a cut out of the soft side of a kitchen sponge and I'm oiling the guitar hanging in the closet (with windows open, gloves and mask, just to be sure).
This time around I'm keeping track how many times I put oil and am currently counting 8 additional times with one light sand in between and I think now the finish is slowly becoming what I want it to be.
Thanks for the advice, I will keep you posted and once I'm done send additional pictures