How can I hide wood stain on painted drywall?
You don't sand painted drywall. Hit up your paint store and ask them what stain-blocking primer they recommend. Apply that per the instructions, blending it out to prevent hard edges, then paint. If the paint on the wall is more than a few months old you may need to paint the entire wall to get good color uniformity.
You might use a soft cloth and a bit of paint thinner to try and gently scrub some of the stain away so it's less likely to bleed through the primer.