Cincy...There's a lot of information regarding this multi-step process on the Boat US Website:
There are also the paint manufacturers sites: like Petit and Interlux; take some time and check them out.
This is just one article: Boat Bottom Paint - BoatTECH - BoatUS
To briefly answer your question yes..you should sand the bottom to remove any peeling or chipping paint, but you want to be careful not to go so far that you damage the gel coat if it's still intact.
Barrier coat's goal is to keep moisture out, but it can also trap moisture in. So the hull should be clean and dry. Bottom paint is used to prevent marine growth, however it is not impervious and will allow moisture in. So, it's often desirable to barrier coat and then apply bottom paint. Then you maintain the bottom paint.
This is, of course a very simplified summary. The actual process and procedures will vary dependent upon how neglected your hull and keel are and if there are any blisters that need repair or any fairing that needs to be completed.
If doing the keel it's best to take it down to clean, solid, shiny metal, fill, fair, barrier coat and bottom paint.. if it looks like the OP's keel.
There are also many variations of bottom paint. http://www.pettitpaint.com/fileshare...painttypes.pdf
You might want to ask around your marina and see what others have success with.