I do as you mentioned - I sand down a few .005 inch below or so and then build back up. Below is an example of what I had to do to get a good "feel". (I use mm in sizing mine, but will refer to inches here.)
On the Elegant Beauty
Sierra the nib end band has two levels.
Click here for a view of the band with two diameters. Look at the band on the bottom pen. The "scroll design" level of the band is a few .00x inches larger than the immediate smooth part of the ring that is next to the blank.
I found that when I turned and finished a blank the exact size of the smooth part of the ring that it butts up against, - the "feel" is as though the blank end is turned undersized. So I now finish it oversize by almost .01 inch and slightly round over the end of the blank.
Rounding over the end of the blank with a very small radius does wonders for the "not quite" perfect fit, especially when the finished blank is .005 - .008 inches proud. Russ Fairfield discusses "tactile feel" on many occasions. To the untrained eye and where visual perception of size difference is not readily possible, (as in a few .00x inches) - tactile "feel" becomes the primary factor.
To me, the "rounding over" of the end is accomplished by putting a piece of 600 grit sand paper (or 2400 - 3200 MM) over the end and hand rubbing it for a second or two or three. The purpose is to round over the sharp edge without making it obvious to the eye that it has a round edge. After this, I put it back on the lathe and finish/polish the blank.
THICKNESS of finish: There is a huge difference in opinion and usage on this forum. It is up to the individual. In most cases I build up a level that Russ would say that the turned blank has been "encapsulated". :biggrin: (I say that with having the utmost respect for him.) Generally I find that beginners are usually focused on getting to the finished pen and over look the time and depth of finish needed. 3 to 5 layers of finish by an experienced person is often enough, but to the beginner, it usually is not enough. An experienced person is consistent in the thickness of each layer; a beginner's thickness layer will vary with each application, and this is only natural. I personally use 1 or 2 thin and 2 to 4 medium layers (or more if needed.)
On soft woods that have not been stabilized, I will almost encapsulate it with a thick layer to help protect it. I have had few pens with great finish on it dent easily when dropped or bumped on a desk. These pens had thin but fine coats and were soft woods. Thick coats (especially with CA) will increase its rigidity.