Alex:
I routinely use a wash coat of ultra blonde shellac (from a small batch made fresh every few weeks or until it's used up) as a sanding sealer. I use a '1 pound cut' (which translates to about 1 ounce powdered flakes dissolved in 8 fluid ounces of denatured alcohol) which I use to wet the entire piece and allow to dry. I do add a bit more to end grain, since it soaks in quickly. I do not add so much to the surface as to get the drying surface looking shiny.
I allow the piece to dry completely for at least a day or two in a warm room (however, in practice, it usually winds up being a few days, since I often do 'batch' finishing) before I return to the final sanding phase of the process. If there are shiny spots on the surface, I remove this excess shellac with #1 steel wool before going on to the abrasives; this removes the bulk of the excess which would otherwise rapidly clog sanding disks. Sanding should be done on a fully dried surface, and as Russ said, must be done slowly and without heat build-up. I have done dozens of pieces using this technique, and it works quite well. The shellac forms an excellent base for sprayed lacquer which is my preferred finish for most of my pieces.
Good luck!
Rob Wallace