I know from previous years of guitar making that whenever you have a dark wood inlay next to white wood, sanding will always contaminate the purity of the light wood. We would always use cabinet scrapers for the final surface prep before finishing - which won't spread the dark dust.

On the sensitibity issue. As your immune system gets compromized by one allergic reaction, other things that wouldn't normally bother you crop up. We're playing in a hobby full of allergic triggers. You just have to be real careful with fresh air, exhaust fans and breathing protectors. The more builders I talk to, the more people I hear of who have had allergic reactions to either cedar or the epoxy.