Tutorial condensed version. Dan Erlwine has a great book on this.
Sand body down to 220 grit.
"Pop" the flame by applying water based analine dye to top. Sand off the dye. Repeat 2-3 times. The flames now start looking MUCH more pronounced.
If open grain wood like mahogany and you want it filled: I prefer to dye the back and sides, then add wood filler, sand smooth and dye it again. Others will fill, sand and dye. Sometimes I leave it open grained & just dye it.
I only use a t-shirt rag for the sunburst as I like the burst to be subtle and fade from one color to another and NOT have a crisp spray line. I've sprayed a burst and did not like it and sanded it off and started over. I don't like the crisp line type sunbursts on Fender guitars or on some Carvin guitars. Particularly the black edged sunbursts. Look at PRS or Tom Anderson guitars for an idea for a good sunburst. Print off a picture and have it displayed near your work bench as a reference.
I mix up my water based analine dye to my preference and have tested it on scrap wood. I simply dip the rag into the dye and wipe it on to the wood gently using a circular motion. (I only use alcohol analine dye for a solid red guitar)
To do the bursts like I do them. You need yellow, amber, red, and a brown (with some red in it). Those 4 colors will give you lots and lots of options to mix.
The sunburst: Analine dye with weak yellow dye. Lightly sand. Analine dye with amber. Sand again and then reapply amber a 2nd time. These are across all the top. This is part of the "popping" the flame stuff I refered to.
Mix your accent darker color to taste. Do a first pass application around edges of about 1 inch. Now take a t-shirt rag and gently fade that from inside to outside edge. Now do a 2nd pass about 1.5" - 2" and fade from inside to outside again. This will leave you a color change that darkens as it moves to the edge with the yellow/amber burst in the middle of the top.
Now take a slightly water dampened t-shirt rag and soak it with Windex. Yes, Windex! Start in middle and wipe to edges. Continue doing this until you have a gentle sunburst fade that is subtle. Then you look at it and wipe and fade wherever you feel like it helps the appearance to get a finished sunburst that you like. Let it dry for about 20 minutes and come back with a slightly water dampened rag & apply Windex again and wipe down the entire guitar starting with the top in the middle to edges.
I use two rags for two colors on the top and a different rag (for a total of 3) for the side/backs. I use several more rags for the water/Windex wiping.
This is NOT hard to do. You just have to use your eyes to shape the sunburst to what you want. It takes me about 15-20 minutes to dye a guitar with a sunburst top using a rag.
Let it dry overnight. The next morning it will look pretty washed out, faded, 1 dimensional and like a failure. It's not !
(if you did it right). It will take about 4-7 coats of lacquer to restore the brilliance and intensity of the color and figured wood.
I use Deft Clear Wood finish OR Min-Wax Lacquer (Home Depot) and after 7 coats sand very lightly with 320-400 grit. Add 7 more coats and same thing. Add 7 more coats for about 21 coats total. This takes 2-3 spray cans.
(NOTE: I think the Deft Clear Wood finish is more transparent. I think the Min-Wax lacquer is easier to work with and polish out)
At 21 coats I start sanding with 800 grit and go to 1000-1200 grit using a block sander which is very critical. A good flat orbital sander will work as a start. Then I use blocks of wood with sandpaper. This is ALL done wet sanding. You must stop and wipe the top numerous times with a dry towel to check the sanding.
When the "orange peel" is sanded out, you will probably have about 12 coats of lacquer thickness left and half of the initial lacquer has been sanded off.
By hand, I use blocks of wood covered with t-shirt rags and Meguire's (auto) Ultimate polish. And I polish very very very gently in circular motions until a glassy super high gloss that looks wet. It takes about 3 hrs minimum to polish a guitar top for me. I do very little polishing on sides and back. I don't care if they look more semi-gloss. A tip is if you have a 1/4" foam pad, you can wrap a t-shirt rage around it and that will add in polishing.
http://www.amazon.com/Meguiars-G19216-Ultimate-Polish-oz/dp/B004HCOE8Q335 on left is Min-Wax lacquer Tele on right is Deft Clear Wood Finish Both guitars done using this method