Sanding an old boats gel-coat merely accelerates the process of compounding/polishing. The usual cavaet of ensuring your gel-coat is thick enough applies; if you screw up here you'll end up painting. I used 600 and 800 wet/dry (always wet) on my 73 Cal and it cleaned up nice. Coarser than that you'll want to be careful not to burn through the gel-coat. An orbiatal, or even a palm sander can be used, but in both cases, do not apply too much pressure, letting the machine do the work. I recommend finish sanding by hand.
The trouble with old gel-coat is that it becomes porous and loses it's shine as a result. After sanding and polishing is done, I recommend Poly-glo. It fills in the pores and gives a great shine. It has been on now for three months and still looks great. I've used numerous waxes and had no-where near the results, and poor longevity too. The Poly-glo is extremely easy to apply; by the time you're done with one coat you're ready to apply another. I did four coats, on a 21' boat, in under an hour. Practical Sailor reviewed the product extremely well and I've found nothing to prove them wrong.