If you want to get rid of the pits then you need to sand it smooth first. Whatever scratches or pits you see before you start polishing will be in the final product. I do not believe the exact sanding pad matters, also it may be a good idea to use a sponge pad under the sanding disk. Sometimes I dont use a sand paper at all, and instead use a 3M roloc wheel (7443). It leaves a nice finish, and will remove small pits. The results are not as good as methodical sanding, but with the right high speed drill you can prep some pretty rough pieces for polishing with that roloc wheel.
Its more important that you dont leave scratches from the sanding disks, you need to go up incrementally in grit, you need to make sure you take out any scratches left from the last paper. Although if I am using a power tool then I usually just start with a 220 or 320 grit (which doesnt lave deep scratches anyway), then move up to 600, 1000, etc. If you are using a power tool then I wouldnt go below 220 unless you have some serious casting marks or pits. With a power tool the 220 will take out most anything.
On a side note, I polished my rear hub the other day and I was unable to get a perfect finish, it still has what looks like water spots. The surface is perfectly flat, and with out scratches, the discoloration appears to be in the metal. So take my advice with some hesitation, seeing as I dont get it right myself. This piece was sanded thoroughly with 220 grit on a DA first, and it still has this odd discoloration.
