The wet sanding is definitely not something done at the factory, but it's a well known trick to get a better seal on the diffs. Most of the time, that is where your leaks will happen. A bead of black grease or even a non hardening gasket sealant smeared around the seams of the two halves is another common mod. I use grease. Look up "LC Racing Differentials" on YT and you'll see even LC recommends the sanding if the two halves dont fit so perfectly together.