I think you're right. I've polished up a number of headlights, and done lots of acrylic and polycarbonate parts that are not headlights. You can't even use 2000 grit to get optical clarity. I think that steel wool will turn that headlight into a cloudy mess.
If you need plastic polishing compound, Novus sells some good stuff. It works. They have three "grades" of polish. Heavy, medium an fine. One of them absolutely cannot be used on polycarbonate.

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