We used phosphoric acid extensively for metal prep while I was going to sea. I assume it is still used widely. When prepping badly rusted areas the rust (iron oxide) was either chipped, or wire-wheeled prior to treatment with phosphoric acid. Application of the phosphoric acid converts the iron oxide to iron phosphate which is the inert or protective coating. The manufacturer's instructions stated that you could paint directly over the iron phosphate without rinsing with fresh water. Generally, that practice was followed unless there was a fairly substantial coating of "loose" phosphate powder on the surface.
It all sounds great but in over 30 years of going to sea we never found a product that would provide long term protection of the bilge or tank top areas in the engine room. We tried most everything from the exotic 2 part expoxies, requiring that the crew members wear clean socks only on the prepped metal, proper drying time, attention to temperature, application thicknesses, etc. Nothing seemed to work for a period greater than 3 years. Epoxies (up to seven coats)worked fine in salt water ballast tanks, that were only exposed to air for about 1/2 of their life cycle, but the metal was sand blasted to near white metal SP-10 prior to exacting application standards.
If you want to learn about metal coatings and rust prevention Google something like "Ship protective coating rust". There are new coatings coming to the market as fast as ships rust away, but it all boils down to preparation.
Oh - to answer your question... I agree with the others-don't sand the treated area, as you will remove the iron phosphate protective coating, and do use the acid full strength.
