I agree with Dan - 7 coats of brushed on is too thick. I disagree that 2 or 3 is sufficient - for varnish - especially sanding between coats. I have found 4 to be very good and 5 to be better - again, sanding between at least the last 2 coats. 7 coats of Waterlox will stay uncured (read - soft) for months - slight exaggeration depending upon relative humidity. And you might have problems with adhesion.
Waterlox company says that you don't need to sand between coats but I often do unless the layer I am working off is perfect.
Michael I think your plan to sand the 3rd coat and apply another 2 or 3 as wipe on is a good one and will keep you out of trouble.
I have never found the need to sand my brushed on Waterlox past 320 grit. I use a good RO sander (I use a Festool ETS 150/3) with Mirka Abranet mesh. The mesh is my go to for sanding any finishes. Otherwise I use Festool Brilliant. I sand the entire surface lightly but smooth. Don't allow the sander to break through the top surface. If this might be an issue sand by hand.
The hand applied coats should not need to be sanded but if you decide it needs the work then I think I would use 320 or even finer and sand those lightly by hand. The finish must be thoroughly dry. No gumming or rolling of the finish while you sand. I you are getting other than white dust the finish is not yet cured.
AND - I repeat this technique that I have been describing through my posts is in regards to flat surfaces such as table tops or shelves or bar tops. I use different methods for applying Waterlox to vertical surfaces and small areas - another subject for another time.