The polishing compound itself won't remove the lines, no, but that's why you use something else first. Either fine grit sandpaper or steel wool. I used 0 and 0000 steel wool to take most of the lines out of my Consular and then shined it up with Mother's. Very shiny, but not too perfect looking.
I've never used a dremel, but assuming you can get the correct attachments for finishing metal it shouldn't be too hard. Just go finer and finer on your abrasive grit and finish with a cotton/felt pad + polishing compound. Again, idk what attachments they make for dremels so you may be best doing it by hand. My experience is with larger power tools (pipe/tube sander, burnisher, etc).