I feel like making my answer to your questions as bloated as possible. This decision may hopefully help others with general questions about waveshining, when to do it, and why it isn't working on a specific character. I apologize in advance for how long this might become.
Most characters can't be continuously waveshined. It all depends on their traction. If they slide too far from the shine, then you'd have to SH aerial/grab/usmash to continue comboing them.
Characters that can't be waveshined repeatedly (shine->shine->shine) should immediately be usmashed or grabbed after you successfully land a shine. Once you've perfected those B&B techniques, you can start mixing it up with waveshine-> nair/dair/dsmash/utilt etc. I also don't suggest practicing doing more than one waveshine yet. Just practice doing one into an usmash or grab perfectly.
Characters you can waveshine repeatedly:
Bowser
Falcon
DK
Ganon
Link
Peach
Sheik/Zelda
Yoshi
Samus
Characters that can't be waveshined repeatedly:
(Just because they can't be waveshined over and over again, DOES NOT mean a grab or usmash will not combo. Marth/Mario/Doc/Ness for example, can be waveshine comboed into usmash and grab. Some characters, due to their terrible traction, can't be comboed at all after a shine.)
*can only be comboed by an illusion after a JCed shine or in a corner.
Luigi
Ice Climbers
*can be comboed with most moves after waveshine, excluding another shine
Mario
Doc
Marth
Ness
Keep in mind that the angles of certain levels will kill follow-ups. Corneria and DK64 are good examples. Sometimes when you shine they will be knocked into the air or bounce because of the sloped ground. When an opponent has been shined into the air or while in the air, their landing animation cancels out the shine's stun or "pushback frames". They can then do anything freely from that neutral position (i.e. Roll, shield, attack, jump)
Characters that fall down from the shine:
(if you land a shine on these characters, I suggest you go for a thunders combo (waveshine -> jab), or techchase grab, usmash, or any other move you think will work.)
Falco
Fox
Game and Watch
Jiggs
Kirby
Mewtwo
Pikachu
Pichu
Roy
Young Link
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As for your second question. Waveshine usmash is extremely important in Fox play. As soon as you land a dair, regardless of your oppponents percent, thats a free usmash. Yes, it is a legimate combo. Shine locks your opponent in stun, then you cancel your shine and follow them while they are still in that stun to connect. If it isn't connecting, you are either wavedashing out of your shine too slowly, or not far enough. Another thing to remember is that if you are trying to go for a waveshine grab or usmash vs. a character with medium traction (Marth/Ness/Mario), you have to dash before the grab or usmash. This is VERY important.
Hope that cleared up any questions you might have had.