It doesn't sound safe!
I wet sanded my instrument with water, but made sure the end grain in holes was sealed, and didn't splash water about much, mainly used it for washing the gunk of the sandpaper frequently. As long as you don't get water under your finish its no hardship to drill the holes again 'cos you put so much varnish/oil/paint on the exposed grain. I'd much rather fill my pickguard holes with lacquer and redrill than wetsand with something flammable.