Hi Julie,
I use a pen mill to square blanks. I mount the pen mill in my drill press, hold the blank with some chanel locks (pliars), and gently bring the mill down to square the blank. I find I have a lot of control this way.
If you were doing lots of pens, I would think that the sander method would end up being more efficient in the long run. You would need to make a jig that indexed the blank from the tube rather than from the blank, so that the face would be square to the tube. Once you get a good jig made and set up, then squaring blanks with the sander would be much quicker and easier.
I sharpen my pen mill with a light touch on the grinder, and follow with the diamond hone. Remove the pilot shaft, check to see that all four cutting surfaces are even, then try to match the angle that is already on the cutter by touching lightly on the grinder. I use the diamond hone to touch up the cutting edge in case a burr was formed.
Is your new pen mill the one made by PSI, that has the multiple shafts? That's the one I have, and I like it!
Scott.