how primer works

I understand that standard paint does not go well on many surfaces, and that primer helps it work out. However, so much of it gets sanded off that it makes me wonder. With porous material like cardboard I can see it getting in and changing the surface composition, but with plastic nose cones or fins that would not be the case. Am I sanding too much, or misunderstanding?

Also I have used nearly a whole can on a 42 inch long, 2 inch wide rocket, and I think I might need more. Is that crazy?

Painting is 90% preparation and 10% painting.
Think of primer as the glue that holds wallpaper on.

After all your prep is done ..... one final light coat of primer should be applied. It should be even with no light spots or runs.
Now you have a nice surface for the the finish coat to "grip" on, much like wallpaper must grip via the glue.
lighter colors like yellow will not look good or be even colored, if applied to a splotchy undercoat of primer.

So if you are using that much primer on a small rocket, I suspect that you are using it as a filler trying to work out imperfections. There are other products for that.
The general course of action is a filler on spirals, sanded smooth, followed by primer. Then inspection, if needed more filler on missed spots, then sanding smooth. Several coats of primer applied, then sanded smooth, if you hit cardboard...stop... you have gone to far. Re-apply primer.

Finally an even coat of primer, left to dry/cure for several days. [if it smells like paint, it isn't dry enough to sand] al light sanding to knock off any grit or bugs .....followed by your finish coat.

If you sand to much of the primer off, the result is usually fuzzes raised in the cardboard and you must start over at square one.

The discussion of proper painting technique is a long one riddled with many practices by many different painters.

BUT there is really only one that works and most are not willing to take the time & effort to learn. Like I said 90% preparation.
I have done large projects that required 3-4 days of filling and sanding 6-8hrs a day for an hour or so of actual paint application.

I can show you how to paint a rocket correctly in a few hours, it would take days of typing to explain it. I'm sure there will be a ton of different "ways" shortly.
Search the forums this has been discussed in length with great detail on "how to"

In my opinion the priming steps are the most important of all in achieving a beautiful finish on your rocket. To add to CJ's comments keep in mind there are three types of primer that you could, and in my opinion should, utilize in surface prep. First is an adhesion promoter (I use Duplicolor, but other brands are available). An adhesion promoter is used on plastics and fiberglass to enhance chemical bond of coated materials. It is applied first before other primers and is not sanded. The second is filler-primer (I use Rustoleum Automotive, but there are others). This is used to fill any imperfections in the surface and should be mostly sanded off in successive coats only leaving the "fill" behind (but as was mention not too much to damage the underlying surface). This, as well as the adhesion promoter, are lacquer-based and fast drying so you can get through fill-sand rounds fairly quickly. The final prime coat is a sealer-primer. This is really a base coat that closes the porous surface of the filler-primer. You can use actual sealer-primer or often I use an enamel-based primer like Rustoleum 2X in gray, black or white depending on what color is best for my top coat. As CJ mentioned, this coat has full coverage but should be only lightly sanded with 220/320 grit to smooth and prep the surface for the top/color coat application.