What has to be done to old thin set from previous tile before retiling

You generally have to take it up... you need to have a smooth base and a base that will alow the required thickness of the new thinset to set the tile correctly.

Does this mean the cement board needs to be replaced or attempt to sand the thin set smooth, In some places the thin set has removed surface of the cement board

As long as you don't have bumps that will cause problems you should be fine. Don't try and sand it... you don't know if there are silica products in it... and silica and human lungs do not do well together. Its called silicosis.

If its well bonded... you will have to replace the cement board... but if you cleaned ip up well enough you can get away with it.

Smooth is a relative term. Laying sheet vinyl is super critical. Laying tile... you have a little bit of tollerance due to the thinset between the tile and base. But ONE lump missed and you have a tile that won't set into place properly.

If it's a small space... it may be easier to pull up and replace the cementboard than clean it up.

If it were me? I'd have ripped up the cement board and redid it with new stuff. But its my time.. and my house. At a jobsite... counting pennies has greater importance, you factor the time one way vs the money the other and make a choice.