PVC can be sanded smooth, and I mean smooth enough to paint on without coating it with epoxy or any other coating first. Here's what I do:
Start by carving the lure to shape, and try to get it as smooth as possible with the knife before switching to sandpaper. This isn't strictly necessary, but it saves some sanding later.
Sanding only by hand, work through #100, #150, #220, and #600 sandpaper. Be thorough, and make sure you sand the entire bait with each grit of sandpaper.
After sanding with #600, use printer paper to burnish the lure body.
This method is time-consuming, but it gives a smooth surface to paint on without using epoxy (which kind of defeats the purpose of using PVC).
I hope this helps.
Ben