RAYE:
Wet will keep the dust down. You could also try using a little bit of 3 in 1 oil or some other oil on the sandpaper. When using the file, it might help a little bit to put a little bit of chalk on the file so the file doesn't clog up with the G-10 and stop cutting. If you ever move up to using a belt sander or something to shape the G-10, make sure you don't profile too quickly (I accidentally made that mistake last week). The friction heat will build up and cause your G-10 to burn and it smells terrible, and make sure you wear an actual respirator if you use power equipment on it.
Sometimes after sanding, black G-10 will look a little bit white or lighter colored. Don't worry. Rub some oil (WD-40, Tri-Flow, 3-in-1) on it and clean the oil off and the color is normal again.