If you want a glass like surface you'll need sand enough to cut down through all that orange peel to form a level surface from the lowest point. Starting with 400 (or as mentioned 320) is probably where you need to be - you absolutely should use some sort of backing or sanding block.
A note of warning though, depending on how bad that orange peel is you may be at risk of cutting through to the wood, and again as mentioned, you may need to shoot additional coats in order to have a decent final finish thickness.
Once you have wet sanded the surface level and to an even matte appearance only then do you begin moving up in grit. The idea is to use the next higher grit only as long as necessary to eliminate the deep scratches of the prior grit, then you move on up the schedule. I start at 600 then 800, 1000, and 1500. Beyond that I use polishing compound on a buffing wheel.
Sanding between coats is not always required, but as soon as you start seeing orange peel it is best to start sanding in order to reduce or eliminate the problem. Wait too long and your workload just grows.
