Something sounds strange! You shouldn't have to go nearly that high with sandpaper. In fact, using 1000+ grit paper on wood is kind of a waste.
I use my grinder to rough shape with 60, then 120, then I usually hand sand 220, 400, 600. Make sure you use something as a backing for the paper. I use a couple of pieces of 8oz leather glued together smooth sides out, about 2-3"X1 1/2".
I might buff before I finish sanding(using the same compound, and buff mentioned below) just to see if I got all the scratches out, and if not, back to the finish sanding.
I then buff, and apply a couple of coats of Watco neutral, as per instructions, and after wiping the remnants of the second coat off, I buff again with white compound on a loose wheel, wipe it down again, and apply a coat of Watco satin wax, and just buff that off by hand.
It gives a very nice finish.
BTW, I'm not using any type of lube with the wet or dry paper.
In my opening statement, I'm not doubting your word, just thinking out loud while trying to figure why you're having the problem.
The white compound I use is an 800/1000 grit aprox, that I got from K&G some years ago.
You might give something like that a try and see if things don't improve for you.
When machine buffing, try a loose wheel, and a light touch, letting the compound do much of the work. Be careful though, loose wheel buffs are the most hazardous. Tape the blade off, etc.
