You're going to need to sand the surface flat after applying the grain filler, so there's no need to go OTT with grits before the grain filler's applied. I'd stop at 120 grit myself, but make sure the surface is as flat as it can be.

Yes, sawdust and PVA would work as a filler, but it's not going to take any stain so you'll have a very visible line. As I've said before, and as Waz says, you're going to have a hard time getting a stained clear finish to look right with that body. Sometimes you need to look at what the body wood is telling you and forget your initial ideas. It really will look better with a solid finish.