I'd be very careful about sanding. Remember the bulkheads are plywood with only a thin mahogany veneer. Agressive sanding and you're through the veneer.
Before you oil or varnish, I recommend you give the wood a good scrubbing, using a wood cleaner like Murphy's Oil Soap.
Furniture polish, used an all types of wood, is oil based, so using lemon oil furniture polish on your interior is perfectly O.K.
Oil will give you a satin finish which you'll need to renew every six months to a year, depending on your climate.
A marine varnish gives you a nice glossy finish, which should last many years.
Either finish is good, it's a matter of chosing the finish you prefer.