So I have some lug nuts that are powder coated where it contacts the rim, whats a good method of removing the powder coating, sandpaper, paint remover ?
I read paint on the contact area it is NOT good, it can screw up proper torquing of the wheels.

You could try a wire wheel on a bench grinder. Powder coating can be a bitch to get off!

Dremel

I've removed powder coat with a 2" round scotch brite pad on a die grinder. Zipped it right off. Won't help you much with recessed lug bolt holes, but the point is you should be able to get it off.

throw them away and get new ones ...problem solved

D'oh! You said lug nuts. Get one of these if you have a die grinder or an electric drill. It should work great for the seating surface of lug bolts.

http://www.shop3m.com/60980018810.html?WT....oc-Sanding-Disc

They have smaller kits that you can buy at your FLAPS for under $15 IIRC. I was just looking at one this morning at Autozone.

Yes, powdercoat on the contact point can change the torque setting a little. All you have to do is put a little bit of oil between the bolt head and where it meets the wheel. For that matter, a change in temperature will change the torque setting. Wheels don't need to be super accurate, torque them to 90 lbs/ft and you are good.

Thanks for all the suggestions guys !!!