Lustercote is lacquer paint, so it doesn't require sanding to adhere properly. The only time sanding is beneficial is if you get a blob from not shaking the can well enough that won't flow out with subsequent coats. The final sanding before the clear coat is a nice touch to get rid of any roughness or orange peel caused by the spraying process.
I've sprayed some Lusterkote and found it to be an ornery product to deal with. It comes out of the can very thin and very fast, so there is a tiny window between laying it on too dry to make it flow out versus creating a run. You have to spray it very lightly compared to Rustoleum and other enamels. if you spray coat #3 heavily enough to get the piece wet looking, you'll get runs every time. The 2 or 3 coat recommendation is way too optimistic. 7 light coats is more like it to get a good smooth finish. You still can't spray it wet even then, otherwise the top layer will just slide off the piece and the whole thing will start to run. You'll spend more money on cans of Lusterkote than you would on some other choices, but if you don't have spray equipment it's about the only thing going. Depending on the colors you are using, Lusterkote often doesn't get opaque. I have a plane in Cub yellow that after 5 coats without primer you can still see straight through it. Darker colors hide a little better, but your primer coat is still very important for opacity.