Thanks for all the insight!!
Great comments everyone, very helpful!
A couple of feedback points:
1) the sandpaper I am using is just plain wet/dry paper from the borg, so I'll have to pick up some of the stearated paper from Rockler next time I'm there.
2) I do have a nice thin card scraper, which I know how to use well, but I never even thought of using it in this situation. Duh!!! I'll give that a try.
3) Thanks for the suggestion about thinning it down to 1lb, I was thinking about trying that anyway as it drys so darn quick that I almost don't have enough time to get it laid down evenly on the entire piece before I lose the wet edge and the ridge starts to form.
4) Since I really don't expect the box to get a lot of heavy use, I'll forego the topcoat and use Dans advice about finishing with paste wax rubbed in with steel wool. I've done paste wax on top of shellac before and been very pleased with it, but I haven't used steel wool to apply it with.
5) Thanks for the advice on how to flow the shellac onto the surface the varnishing technique, I've definitely noticed that it behaves differently than varnish!
Well, back down to the shop I go to get rid of those ridges. I'll post pictures when the box is done.