Hi Dave
Basically, you use aluminium oxyde (usually pink or white) for grinding hardened steel. What size of grit is difficult to say but I would use something around medium to fine. Not too fine if you need to remove quite some material and not too coarse for the finish.
Truing up the grinding wheel before grinding should help to get a better finish. With such small grinding wheels (and rather unstable conditions) it is useful to reduce the contact line of the grinding wheel to approx. 2mm. (otherwise the wheel will be just pushed away instead of grinding off the metal)
What is very important is using some lubricant for the finishing pass (I use Wd40, you can also use window cleaning fluid) because this gives you a pretty nice finish and the difference is quite big compared to not lubricated. It doesn't take a lot, you only have to get the steel and the grinding wheel wet (and put some again after each pass)
And finally: you will have to spark out a few passes with no feed for finishing.
Oh and this video may help you too:
Florian