By & large, I like to do as much of the necessary sanding as possible, before cutting anything out. For sanding bare hardwood, in preparation for a finish, I usually will start with 100 or 120 grit. This is for wood that I've planed, to remove the milling marks. It really depends on what the wood surface looks like when you start. If it exhibits lots of roughness from milling or other surface defects, you may have to start with a coarser grit and work your way up to the 100/120. From there I go to a 150 grit, then stop at 180 grit. The objective is to progress through finer grits to minimize the scratches left by the previous grit, without trying to sand the whole way with the finest grit.
For plywood, I generally skip the 100/120 grit step. Most plywood has been pre-sanded and if it's veneered plywood, you must be careful not to sand through the veneer. Veneered plywood will get a light sanding with 180 grit. Baltic Birch ply will start out with 150 and finish with 180.
Sanding with anything finer than 180 grit may not really accomplish anything. As long as the wood surface is smooth and scratch & blemish free, sanding with finer grits isn't really necessary. Once you apply a film finish, you will have to do some sanding between coats to get the surface smooth anyway. One exception to this is if I intend to use an oil finish, such as Danish oil. Since it doesn't develop much of a film, I may sand the bare wood to 220 or 240 grit before finishing.
