For cutting sandpaper, I use one of those craft knives with the break-away/disposible blades. That way, as the blade dulls, one segment can just be broken off, and you have a new sharp corner to work with. These can be found at most stores, but the best place to get them is usually a dollar store. Also, I really recommend 400-600 sandpaper. Children seem to prefer it over the rougher grades.

As for using the rotary cutter on craft foam, etc: practice, practice. If the plastic quilting ruler causes too many problems, you might want to try using a metal ruler instead. They are usually backed with cork, so they stay in place better, and they don’t chip. Obviously, you then lose the advantage of the grid that’s on the quilting ruler, but it’s probably a worthwhile trade-off.