You don't have to go any finer than 320 grit to apply finish to.If you get it too smooth the finish won't have as much to adhere to.I don't like steel wool myself as it can pick finish out of the wood's pores and between coats,it may leave a slight oil residue.I just use the sandpaper.I use fairly stiff felt pads as sanding blocks.It makes a nicer job to get all the finish off but you obviously can't do that over the decals and writing.Just sand up to them and very lighly over top of them with 220 or 320.There is finish over them so you can sand lightly but be careful not to get carried away.
A lot of people use Tru Oil.I have been using Helmsmans satin spar in a spray can 4-6 coats.The glass doesn't need a ton of finish but the wood needs to be protected from moisture,especially the limb edges.
If you go to the Trad History/Collecting forum,somewhere,Bowdoc had a 100+ page how to on everything you would ever need to know about fixing and refinishing old bows.A ton of information.
I think your Deft will work well.