Sharpens by grinding and moistens hot inside (5)

I believe the answer is:

whets

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'sharpens by grinding' is the definition.
'whets' can be an answer for 'sharpens' (whetting is a kind of sharpening). I'm not sure about the 'by grinding' bit.

'moistens hot inside' is the wordplay.
'moistens' becomes 'wets' (I've seen this before).
'hot' becomes 'h' (abbreviation, eg on taps).
'inside' means one lot of letters goes inside another.
'wets' enclosing 'h' is 'WHETS'.

'and' acts as a link.

Can you help me to learn more?

I've seen this clue in the Sydney Morning Herald.

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