Dang i guess my other post never went through.
You can do it either way. All at the same time, or bay first, then body. I know some guys who have a show-status engine bay, and the rest of their car has been in primer for years...
When it comes to the paint being applied, almost anything that comes out of a spray can is garbage. It just won't hold up to the fluids your engine needs. ESPECIALLY gasoline and brake fluid. It's not worth it to risk running cheap paint after all the effort you're going to put into it. Urethane base is what you want to use here, not lacquer. Having worked on a wide assortment of colored engine bays, I've learned a few things. White let's you see everything. It's bright, easy to work in, you can find dropped bolts and such in a fraction of the time, and leaks are easliy detected. However, it does get dirtier like Hubs said, and it does make everything look pretty cluttered. Black is the opposite. Very clean and streamlined. But you can't see dick when you have your head down in the bay. Also easier to keep clean.
Flat or satin finishes have the ability to make imperfections blend in and look more aesthetically pleasing, but from a functionality standpoint, it's more of a pain. All the fluids will 'absorb' into it. Just think of any flat surface you've touched or gotten greasy. It's a pain to get the marks out, and you usually just end up creating more marks trying. If I were you, I'd get the glossiest finish possible. That way it cleans up no problem with some mild soap and a pressure hose.
In this application I'd use some epoxy primer over whatever surface you've sanded down to. Metal, leftover paint, primer, filler, it won't care. Then hit it with some single stage urethane. If you really want a tough as nails finish, do a basecoat/clearcoat over the epoxy. But mix in some clear hardener with the basecoat, then when that tacks up apply your clear. Nearly bulletproof. I've done this on suspension and axle parts with great results.
I swear by SPI epoxy primer. Cheap as dirt comparitively speaking, but the quality far outshines the competitors in the same price range. You have to order it by phone though, but the guys over there are great. Google southernpolyurethanes if you want some more info. I've also used Eastwood's epoxy primer and can't say anything bad about it. It's re-badges kirkwood primer, which is also decent stuff.
