If the surface is edge grain and the previous finish was only wax, wiping down with mineral spirits and then sanding using progressively finer grits up to 220 or so should be pretty good preparation to refinish. Skip the soap and water treatment as it won't dissolve any wax and only complicates finishing. Before applying any finish the wood should be smooth and dry. Any staining or blotching you can see is not going to be hidden too much by a clear finish - it's sometimes possible to bleach out stains but this is tricky to do well.
If you are still getting something soaking back up after sanding down to the raw wood, it could be a prior mineral oil treatment. Mineral oil never hardens and is often used on wooden butcher blocks and countertops. Simply reapplying more would be one refinishing option. It's easy (you just apply until it is no longer absorbed) but you have to reapply it frequently. Inexpensive pure mineral oil can be found in a pharmacy (it's sold as a laxative).
Another option would be a pure tung oil finish. It would be slightly more expensive but a little more water resistant. You can get it from a woodworking or finishing supplier. Most "tung oil finishes" sold by hardware stores are not actually tung oil so check the labels carefully if you go this route. It would be applied and reapplied similarly to mineral oil.
Some "Danish oil" finishes are a blend of varnish, oil, and thinner, and others contain only thinned varnish. Generally one applies "Danish oil" in light coats such that a film is not really built up on the surface of the wood. Often wax is then applied over it. This feels nice on furniture but it is going to be less durable that a slightly thicker application of regular varnish applied with a brush or thinned and then wiped on in several coats.
The mineral oil or tung oil would be my choices for a counter that you are actually going to cut on. On the other hand if you don't plan to cut with knives directly on the counter, and if you are able to prepare the counter down to a clean, dry, smooth surface, a wiping varnish is probably the most durable and best looking option.
The short ends you pictured are the cross grains of the board. What I see is that you have used a too coarse sandpaper on these edges. This should be easy to fix. You need to step down the grit of the sandpaper. Any final sanding should be done with 220 or 320 paper. On these end details, use fine paper, break its (paper's) back so it is flexible, and take your time working it on these ends by hand. It may take a few minutes, but it will smooth out nicely.
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The usual way would be to cut the grooves with a table saw and a dado set, and cut the floating tenon on the table saw as well, but for small stuff, biscuit joinery works much the same way. You could also cut the groove with a router table. (It would be hard to cut the groove on the edge with a router without a router table unless it's a BIG piece of wood.)