A lot longer of an answer than you need
You guys sound like you have the right idea. I haven't been around painting much for the last 20 years, but prior to that did a lot of it. Generally speaking, going down to bare metal is a waste of time and money. Almost all factory paint jobs form an excellent base for future topcoats, especially on older cars where they didn't have problems with deteriorating clearcoats. Zs fall in the former category.
If you were starting out with a never-painted Z car with faded (not cracked) paint, you just really need to take the oxidized layer off. In other words, hand sanding with 320-360 (paint cans will usually specify grit of final prep paper) paper all over until you're into the meat of the paint will do just fine. This doesn't necessarily mean going through to the primer, and I tried to avoid it. The primer that the car came with is formulated for that topcoat and might not work as well with the new one you're applying. After that, hey, I just hit 'em with 3-4 coats of acrylic enamel. About 10 years ago, I saw a car I'd painted a decade before that and it still looked good.
Some other tips:
* Never paint when it's raining outside, even if you're inside
* Whatever paint product you use (Dupont, PPG, House of Kolor, etc.), stick with their products — reducers, thinners, primers, etc. — for the whole job. They're engineered to work together.
* Get reducer for the temperature in which you will be painting the car. Not the temperature it is outside when you buy the paint.
* If you're new to this, get a viscosity cup and use it. Improperly reduced paint is on of the biggest cause of runs and other 'imperfections.'
* If you can, make friends with an experienced body guy. Ask if you can pick his brain from time to time about your project. Also ask what his favorite beer is and make six packs of it appear on his doorstep from time to time. He's also a good bet to put the final finish on for you after hours at a reduced rate.
* Some shops 'rent' their spray booths after hours. These are very clean, well-lighted, well ventilated places to paint cars. You CAN achieve an equivalent finish in a garage, but it's much harder.
* Wear a quality air mask with fresh filters.
* It's MUCH easier to repaint a car the original color than to change colors, for lots of reasons.
* Do NOT spray the new catalyzed isocynate (sp?) paints at home. Even with a facemask, they will poison and likely kill you. Leave those to the pros, who use fresh-air breathers, kind of like scuba divers.
* All bare metal MUST be primered before painting. Primer-surfacers are best for this, so you can fare the repair into the paint.
* All dings should be taken to bare metal before bondo-ing. Never put bondo over paint.
* Wash all cars down thoroughly with wax and grease remover BEFORE you start pounding, sanding, etc. If you don't, old silicates will come back to haunt you as fisheyes or bleed through in the new paint.
* Buy a book on car painting, read it, and practice on your sister's car before you paint your Z.
* For severely cracked (dry lake bed) paint, take off all the topcoat. If you're lucky, it's just the paint, not the primer, that cracks. (This is common on dark colored cars in extremely hot places like Arizona.) Go down to the primer with 220 or so and then hit the whole car with primer surfacer. Then proceed with 320. Otherwise, you really don't need to primer-surfacer the whole car.
* For a really nice, smooth shine, add hardener to acrylic enamel. It also allows enamel to be buffed later, if you so choose. You cannot buff non-hardened enamel. It will just dull the paint.
Well, there are lots of others, but I do tend to go on a bit. All bets are off with cars that have been painted, as the quantity and quality of the jobs varies so much. In those cases, you sometimes do need to take everything off and start over to get a good job.
Bottom line, you can put a killer paint job on any car with enough care and proper prep. And like they say, 90% of a good paint job is in the preparation. On the other end of a scale, if you want the best, hardest, shiniest show-car paint job possible, bring the car and a fat wallet to the best body shop you can find. They'll be happy to help you.