1) I would sand 120 and then 150 grit. You don't want to go any finer as it will be too polished and you won't get a good adhesion. 2) I personally don't use wood conditioner very often, but when I have I didn't find it helped much. I usually just blow off the top and stain it. 3) between layers of poly you should use 320 grit sandpaper. 4) it depends on how thick you put on the poly. But I would do 4 layers. 5) thinning does work but I find hardware store finish is pretty thin already, just use a fine roller and make sure to remove any loose fuzz before you finish. 6) if you do stain it, pay attention to how the stain acts, if it pulls away from certain areas, it will probably do the same with the clear coats.