Wet sanding may take off too much color if you're not careful. I would use rubbing compound by hand so you can control the finish. After the compound, if you really wanna do it right, go with a glaze or swirl remover, then a polish or wax. Basically treat it like paint.
Here were the tail lights on my Eclipse after a good amount of buffing (Talon tail lights and I used the same VHT nightshades):