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1) Assuming the coffee table is being used inside, I would stain it with a water-based stain. One, two or three coats depending on the look you want (practice on scrap bits to find your finish). Following that, I would use glossy or semi-gloss Varathane Polyurethane. 3-4 coats, depending on the finish I'm looking for.
2) I've always been told to only go to 120grit before staining. Depending on the wood, you might get some grain lift and need to sand with 120 between coats. Again, you have to practice on scrap that you've cut and worked in the same methods as your finished product to determine what your exact finishing technique will be. You only go to 120 because you need the wood to absorb the stain. On the stuff I've been doing I prefer not to sand after I stain for fear of changing the look, but up to 220. On the third coat of polyurethane the piece will start to look quite smooth, and it gets better from there.
3) Uh...you build them? That's sort of part of the fun, isn't it?
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