I know this thread is a few months old, but I've done this recently, with 1/8 inch plywood fins.
My sander is just a Great Planes hand sander. Little, meant for small jobs, not really ideal for larger rockets, but it was what I had, I tried it, and it did work.
I used a coarse grit - maybe 150, maybe 100. It was kind of tedious, but I enjoy the craft of rocket building.
I did about a fin per day, which cut down on the tedium.
As for people saying, "don't bother," I understand why they may say that, but every time I ask a how-to question on TRF and get a "don't bother" answer, I find it really frustrating. Because they don't know why I want to do it.
I airfoil almost all my fins, and I've heard the "don't bother" comment before. I suppose people think I'm trying to double my altitude or something, which airfoiling won't do. But it does help increase altitude somewhat, for one, and for another, I like doing it and I like the way it looks. Which is why I've asked these questions in the past - because I want the rocket to look good.
I don't blame anyone for not bothering to do certain things when building - filling tube spirals, filling fins, airfoils, etc. It's a pain. But I like the process, and the way it makes a rocket look, and "don't bother" is not a helpful response to beginner's questions.
As for how I did it, I just did what I do with balsa fins, but with more elbow grease. I usually do something like this:
[video]https://youtu.be/zYm_1R3vMo4[/video]