How to fix a leaky toilet flapper valve over brass outpipe
From what you have said, it sounds like a better way to go might be to replace that top edge of the brass outlet pipe. They sell kits in the store to replace the flapper valve and the seat (which is what you are struggling with). Have you looked into one of those? Something like this: 

http://www.amazon.com/Lavelle-2003BP-Flush-Valve-Repair/dp/B001ARJR8S

Trying to sand the existing seat down, in place, until you get a good seal sounds like a lot of work with little chance of success. With a kit like this, you seal a new plastic seat down on top of the old one with a silicone sealant, then the flapper seals against the new seat. If one of those seat replacement kits will adapt to your toilet, that is your best bet, in my opinion.
Hope this helps.