I have had way too many hobbies, including boatbuilding. I have
sanded plenty of fiberglass, mostly without a mask, and now that I'm
older and maybe a little wiser I expect that those several pounds of
dust that have made their way through my lungs to cause some trouble
later on. Dust can get into your eyes, too, even with goggles, and
cause eye irritations that make you look like you've been on a big
drunk. And it didn't seem to matter how much clothing I wore; it got
into everything and made me itch. A cold shower gets most of it off,
while a warm shower can open the pores and let it in so it can bug you
for a few more days.
I have sanded it wet a few times (with air sanders!) and there's
no dust at all, but you have to make really sure things are absolutely
dry before any further layup. Any moisture that gets into the matrix
could cause structural problems. A lot less big a deal in boats than in
airplanes, since most boats are way overbuilt.

Dan