I used your method and it worked quite well. I could only find Taimiya grit as fine as 2000 and not 4000. I only used Meguires Scratch X and it turned out great! I think I will have to use a rougher grit frist next time to remove the really big dents and scratches.
here's a pic of the finished product...
'02 C32 AMG @ 18psi - Eurocharged custom ECU/TCU, ASP 178mm crank pulley + NW PSK, CM30 i/c pump, NW i/c iso kit, EC i/c, Magnecore wires, NW CAI, SL55 Y pipe, NW ported intake manifolds + gaskets/spacers, NW inconel exhaust manifolds, NW catch can, dual exhaust, H&R sways, H&R coilovers, H&R spacers, Quaife ATB LSD, goodridge lines, EBC yellowstuff, AMG 18" rims, Zeitronix datalogger.