Tim, don't over sand the spalted cap, they are very thin. As for rest of the body I'd keep sanding till there's no evidence of machine marks. The cutwaway photo above still shows you have some more sanding to do there. Wipe a cloth with turps over the body and this raises the grain and shows any machine marks or imperfections in the body surface.
Best of luck.
The DingoBass mantra is sand, sand, sand again, and when you think its finished sand again ! But this only applies to the body, not the cap !