JJ, if that's considered a dumb question, then I've asked some really, really dumb questions. :-)

Anyway, I haven't gotten to that point on my first boat yet, but from other woodworking experience, I can say that the "light" sanding between varnish coats is to get a good bond. Remember, it's a "light" sanding - fine grit, light touch. You just want to dull the surface, not grind it off.

If you need to do more sanding than that to get a smooth surface, it should be done before the first coat of varnish. And, yes, you need to do it between each and every coat for proper adhesion. But if done correctly, there won't be that much dust.

Bear in mind, this is from other wood working experience. If boat building is different, someone please jump in and correct me.

Hope that helps.

Rick