I tried painting my fuse,which was a mistake,now I want to cover it with monocote,do I have to sand off all the paint or will the monocote stick if I just sand it down smooth and re-apply Balsarite?

There is a strong chance that the paint will bubble and other unwanted occurances will take place if you don't get most of paint off. I could be wrong here, but my experience is monokote is best on bare wood, and the paint remaining will act as a barrier for the adhesive in the covering. That adhesive needs to permiate the wood to get a good bond.
Nothing to lose by trying a small inconspicuous spot. Matter of fact try a few different areas with different techniques and see which offers your best finish.
That's about all I can come up with, hope it works out for you soon.