#1
A while ago I read about a kit that was being sold that included simple tools and sandpaper to easily level and dress your own frets, it boasted that you could even do it without taking the strings off. I'm fixing up an old guitar I've had laying around and I wanted to give this a try but I can't seem to find it anymore.

The procedure was that you loosened the strings and moved them out of the way with a little plastic thing, used a guide or template that you put sandpaper in and just lightly grinded the frets until they were level.
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#2
Sounds cheesy. Go buy dan erlewine's guitar player repair guide. Great section on fret dressing and fretting. Tons of other info. It's a great all around book.
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#3
Problem is to properly dress frets the neck needs to be really straight. The straight edge i bought for doing frets was 30$. And doing with strings still on the guitar would be a real pain in the butt. Stewmac sells the tools for this kind of work. For a light dress you could probably get away with their radius sanding blocks and the right sandpaper. But s really easy to screw up a fret board. And any kind of super cheap kit for this purpose thats cheap isnt going to be very good.