Are you saying you put polish on the sandpaper instead of water? I wouldn't do that.
I use 400-5000 grit. Those super high grits aren't really doing anything more for you IMO.
You can get away with one strip of each grit paper for all three axles. Not a bad idea to wipe clean between grits. You should be dipping your paper in water in between anyway, or flushing with water.
Don't use your fingers or a hard surface against the axle. Just chuck the axle in a dremel and while holding each end of your paper strip, run the paper up and down the axle.