With today's basecoat/clearcoat finishes (color layer followed by a clear top coat), what your dealer has recommended is the proper solution for fine scratches. The color sanding process is as follows: Wet sanding with silicon cabide sandpaper-starting with #800 grit and moving thru #1000 to #1200 to #1500 ( the higher the number the finer the grit) and followed with a final polishing compound.
If, however, the scratches are deep enough to have gone through the clearcoat, they cannot be color sanded out, as the clearcoat would have to be completely sanded thru to remove them! If this is the case, the dealer owes you free refinishing on the panels that were damaged. If I were you, I would solicit an opinion from the best independent autobody shop in your area. Make sure by asking around that it is a quality shop the does fine work-not a shop that just cranks out insurance work as fast as possible.
As I see it, there are three possible outcomes depending on the severity of damage: 1) color sand & polish 2)prep the panel(s) & clearcoat 3) completely refinish the panel(s). I would value the opinion of a trusted independent bodyman- the dealer might be inclined to offer the solution that is easiest (least fuss & cost) for them, but it may not be what is needed to restore the damage. Good Luck!