I stained the canoe I just finished ... actually used an aniline dye ... there have been concerns expressed that even a water based stain may not bond well with epoxy. Worked very well for me. Check out Martin Step's excellent site for extra info (greenval.com).

Dyes are available from Lee Valley here in Canada.

As for sanding .... my hull was pretty smooth before dye, and didn't raise up too much .... a test would be your best bet ...

James