I blast with aluminum oxide. It's a harder material and will last longer then glass bead or walnut. Take note though, it can damage thin pieces of metal. However, for cups you shouldn't have a problem. As for grit, that is personal preference really. The courser the grit the more "textured" the metal will be. I forget what I have but I think it's like 120.
As for vinyl to use, I just use scrap Green Star or Oracle 651. So long as you're not trying to do fine detail work, generic vinyl has worked well enough. My problem is cutting through the powder coat can take awhile and I often blast through the vinyl. Granted this is self applied powder, seems like I recall stuff on the cups from the store was easier to cut through.