1. Yes you did sand off the paint.
2. It doesn't matter as it's cracked anyway, there was no easy fix for it so don't feel bad, it was already wrecked.
Sometimes you can make stuff look better by wet sanding it then re-clear coating it, but by the time you do all that it would have been easier to just repaint it. Scratches can usually be fixed, or at least made a lot better, but when the base coat of colour is damaged then all the polish/wax etc in the world won't fix it.
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