Before you break out the sandpaper to go over touched-up chips, try this instead:
Prepare the chip by cleaning well with a wax remover. I sell a good one by Wurth called Clean Solve, but 3M sells a good one called Prep Solve I think. Any good paint supply store will have it, for removing wax and prepping for painting to cut down on fisheyes. I like using this instead of paint thinner because it is more gentle.
If necessary use the neat sanding sticks that Gary talks about from Wal Mart.
Finally, with a fine brush lay in some paint, but don't worry about making it neat. If you have several chips in the same small area, do them all, but if just one chip here and one chip somewhere else, do one chip at a time.
Before the paint has a chance to dry any, take a clean cloth saturated (not dripping, but wet) with the solvent. Lightly rub over the chip. What will happen is you will remove any paint outside the chip, and you should leave a layer of paint inside the chip. The solvent won't harm the factory paint.
Wipe with a soft dry cloth to buff to a shine. You may need to do this a couple of times to fill in the chip most of the way.
I have done this on several cars and it is MUCH faster than trying to lay in the paint carefully, or sanding it down after you fill it in and get it outside the chip. Plus any sandpaper that touches the finish means you will spend quite a bit of time getting the shine back.
My method fills in the chip so it is very hard to see, takes almost NO time, and does no harm to the finish. Give it a try, if you don't like the look, you can always do it the hard way.
This method won't work for really big chips, because you will wipe out most of the paint. And it won't work for really shallow chips or scratches, but give it a try. Maybe try a very thin cloth to wipe off the paint, stretched over a small block of wood so you don't go into the chip so much.
Oh and about water based paint, it is the mandated standard now. For EPA reasons, factories can't use solvent based paint anymore.
