I generally have to answer by saying, "if it was my boat".
I'd do the whole damn topsides. Assuming that's blue gelcoat, and not paint, and assuming as you say, the damage is fairly superficial, I'd go through the whole process.
Absolutely wet sand it. By hand. You may be down to 220, then 400, 600 800, 1500, followed by rubbing compound, followed by polishing compound. The trick will be keeping your topsides fair, as you need to remove scratches from that one area, not the entire topsides. You can't work aggressively on a single scratch or bad area, you need to do the entire compromised area with 220, and blend that into the surrounding area. Otherwise, when you're done that SHINY dark blue is going to look rippled.
Depending on the condition of the rest of the topsides, you may be only using rubbing compound there, but I wouldn't rule out 600 or 400 without seeing it. Yes, you could go directly to compounding, but you're likely to be compounding the scratches, not eliminating them, and if you don't get the underlying scratches with wet sanding, no amount of compounding is ever going to get you the kind of shine...my boat has.
I've done a few boats following MaineSail's instructions:
Tips For Compound, Polish & Wax
He can take you through the process of using the correct materials, the right tools, the right pads for compound and polish, and proper use of the right tools. You can skip all the steps you want, but if you want your topsides to have the shine they had when they were new, do it his way. Also, the smoother and shinier you get them, the longer your shine will last. If you do it right, you'll be able to hold your watch several feet away from the topsides and easily tell the time by the reflection in the gelcoat. And, that's BEFORE you apply wax. You'll find that it's so shiny, the wax provides no additional shine, just protection.
If you decided to simply compound and polish, you won't be doing any harm. You'll get it looking better, and the shine that you get, if you compound and polish correctly, will be fairly long lasting. It just won't look as good close up, and if you're not satisfied with it, at least you haven't done it any harm.
The only way I see harm being done, is if you wet sand the bad area, and don't take care to blend it in with the surrounding area. That'll be a tough fix.
If you decide to use the Mainesail approach, you'll find it's a bit of a daunting read, as he packs a LOT of info into his article. For me, it took a little studying, but everything you need to know is there.
Once you know the methods, you know them for life. And the only downside of that is as you walk through the marina and see people working on their topsides, you have to learn to not walk up to them and say, 'you're doing it wrong'.
