I use cutters to remove the nails. Not primarily to be able to reuse the nails, but mainly because sanding down the nails is an annoying business. In case it doesn't work because the nails are buried to deep (which I try to avoid) I use a hobby knife with a thick, strong blade (pictured below) to pry them out, keeping the knife as flat and horizontal (parallel with the surface of the hull) as possible while twisting it round its axis. After sanding there is no need to fill what is left of the holes with woodfiller. Below is a picture of the hull of HM Bark Endeavour after sanding.
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