Yes, Yes, No.
The process you've discovered (stumbled upon) is called rubbing out a finish. I prefer to use a better varnish than polyurethane, but some will work alright (usually not Minwax products). Sanding between coats is needed; I usually use 320. Before the last coat you need to get the surface level. That means using a sanding block and not your hand.

Rubbing out a finish requires you to use a high gloss. It is harder and clearer than semi- and satin. Mfrs. put occluders into the product to dull the finish making it less transparent and softer. Therefore, use the gloss. If you want a satin or semi- finish just rub it out to different degrees.

My normal schedule is to wet sand the final coat with 400, 600, 800, 1200(all wet and dry). It will take me less than an hour to do a table with all four. Remember all you're trying to do is establish a scratch pattern that completely obliterates the previous one. Once finished with 1200, I can either go to a finer paper or rubbing compound to get whatever gloss I'm looking for.

One good note that all finishers use is to have a bright light source shining toward you on the work.

Get back here if you have more questions. [Oh, and the wipe-on, no is because it is not thick enough]

Thanks for that response. I love reinventing the wheel. I think I have 13 patents on it now.

A few more questions...

Following up with some internet searching, I see some recommend waiting for polyurethane to completely cure (30 days or so) before rubbing it out. But I was essentially rubbing out the finish after 8 hours. What would be the difference of waiting for a longer cure time before rubbing? I really wanted to wait no more than 48-72 hours to finish, not one month.

You said that you increase the grit 400, 600, 800, 1200. But I really liked the look with just the final 600 grit dry sanding. It was less sheen then gloss. If I sand it higher, won't it keep getting glossier?

When I was rubbing it looked like I had a few witness lines where I rubbed through the top layer of poly into the next layer. It threw me because it looked like uneven gloss that I was trying to get rid of, and now I realize that I was just making the problem worse. What's the best way to avoid that? Can I just final sand with 1200 to diffuse the light and take off the absolute minimum amount of material?

You could try pumice stone and oil. Ground pumice is sold just for this use. You can use a cloth on a wood block, but the felt blocks sold for this work are better. You wet the felt with oil, dip it in a coating of pumice, and you're off to the races.
IMO it's never as good with poly because it will always be somewhat dull when rubbed out, because of the molecular structure. Regular oil varnish rubs out best.
You absolutely have to wait for a full cure, or odd things will happen in the prematurely rubbed out finish when it does cure, which it will.
And as you have already discovered, burning through an upper coat into a lower one creates a very weird and permanent defect.
Casey

Fam-Man,
You're getting good advice here and everything said, so far, you should heed. The trick with varnishes is to put,at least the last one or two on thick because the coats do not integrate with one another. They remain separate. Lacquers "melt" into one another and are typically harder than varnishes, oil or waterborne, and are much more fun to rub out.

You didn't read thoroughly enough my earlier post about scratch patterns. So, once again. Finish sanding (not shaping or excavating)is nothing more than establishing a pattern of scratches with one grit, then going to a finer grit and forming a new pattern of scratches that obliterates the previous pattern of scratches. The reason we don't skip from 100-220 is it is too damn hard and takes too long (if ever) to completely obliterate scratches made with 100 by using just 220. If you don't skip grits you can do it in a tenth the time and it will look better in the end. If you aren't seeing the fine scratches, you don't have a good enough light on your work. If you were really seeing what was going on, you wouldn't even have to ask about going directly to 1200. So, get a good light source and shine it at a low angle directly facing you on the work. Ideally, at eye level but directed on the work so it reflects to your eyes. We have a bank of windows along one side of the shop. Finishing is set up facing the windows and with incandescent lights also. Hope this helps.
Richard

Thanks everyone for the feedback, this is great. Some further follow up questions if you all have the patience. (sorry for such beginner questions, haven't tried this stuff before).

Richard - I appreciate what you are saying with regard to the grit, but I was thinking that if I went straight from dried poly to sanding with 1200, there would be no grit to obliterate, no? Its only when I start with the courser grits on dried poly that I have to obliterate them with finer grits.

"You absolutely have to wait for a full cure, or odd things will happen in the prematurely rubbed out finish when it does cure, which it will."
What odds things will happen? I ask because my sample piece is far from perfect but I still preferred the rub out looked after just 8 hours to the non-rubbed out look. Just curious what the effect will be.

Does a high build poly make it easier to rub out without going through the top layer? I imagine it takes longer to cure.

Deft Clear Wood Finish looks interesting. I hadn't heard of it. I was attracted to polyurethane because I had used it before, it looked like the product to use, and it was clear. It looks like Deft Clear Wood would be clear as well. Does it protect and last as long as polyurethane? If polyurethane is harder to rub out because it is scratch resistance, doesn't that mean that Deft would be less scratch resistant at the end of the day? Also, can someone clarify "some practice and a very good brush to get a good finish." I have gotten the feel for polyurethane and keeping the brush full, slow steady passes etc. Why is the Deft harder to put on?

First.
1200 will just polish the nibs and other imperfections.

-["You absolutely have to wait for a full cure, or odd things will happen in the prematurely rubbed out finish when it does cure, which it will." What odds things will happen?]
You have to wait for the varnish (poly is a varnish) to harden clear through that coat. As I said earlier, the last coat of varnish does NOT incorporate with the previous coat. If it is thin, it becomes easier to sand through; if it isn't dry, the finish will peel or roll or just clog the paper. There are other things, as well.

Deft: It is not varnish, it is lacquer. Lacquer, as explained above, is a joy to rub out because the last coat dissolves into the previous coat (it builds, in other words). When using varnish, the last coat should be thick, and that takes a long time to cure. Lacquer doesn't have to be put on thick because it "builds". I haven't brushed lacquer, only sprayed it. But lacquer dries fast, builds and has a harder surface making it easier to rub out. Somebody here may be able to help with brushing the Deft.

Thanks for the help everyone. I started using a gloss poly last night.

I have a new question - For sanding after the first coat of poly I understand that it is just supposed to be a scuff sand of the surface for adhesion. How much sanding is that? I was working on it this morning and I used a 320 grit on a sanding block and with a low amount of pressure went over the surface 3 or 4 passes in the direction of the grain. Is that sufficient for adhesion? The surface is definately scratched but I worried if I needed more passes for more teeth for adhesion.

Sand it thoroughly, making or keeping it level, if possible. You're not going to sand through your finish with 320. Get in the habit of making a consistent scratch pattern on all sanding. The most important thing is to get all the bumps out and all the dust off before re-coating.

My rule is "uniformly dull" between coats.

With respect to final rub-out:
One of the problems trying to rub out polyurethane is that it is not as hard as other finishes. It is more abrasion resistant and, after all, rubbing is abrasion. Think of the difference between a tire and piece of slate. Slate, while harder, is easier to scratch / abrade / polish