How you do the last coat depends on how glossy you like the finish to be. If you like a satin finish then yes gently go over it with the 0000 steel wool. Personally I leave the last coat as is and do nothing except let it dry.

You really can't put too many coats on, but 5 or 6 is about right for grips. If a year from now you want to touch them up, just hit them lightly again with the steel wool and apply another coat or two. I like the somewhat glossier look of leaving the last coat as is. I have never diluted the Tung Oil - I just use it right out of the can.

I refinished a Marlin Rifle stock with 100% pure Tung oil and applied about a dozen coats initially and then another coat or two a few years later. The rifle still looks spectacular! I love the Tung Oil finish and have used it for 40 years on gun wood, furniture, moulding and frames. I still have the original can of Hopes 100% Tung Oil that I purchased back then - a little really goes a long way!! The best part is since Tung Oil that is 100% pure has no additives it lasts forever with no shelf life.

NOTE: Some confuse 100% Tung Oil with products that contain Tung oil but are blended with other chemicals. Those do not have an infinite shelf life.