While Dremel is a very handy tool for doing this and that and almost anything, it is also easy to make a real bad job both to your workpiece and yourself if you don't know what you are doing. At least remember to wear safety goggles when working with high rpm tools.
What it comes to polishing compounds i use Autosol and Farecla G3 when polishing metal objects. They work ok with Dremel and with polishing by hands also.