Aircraft riveting uses the gun end .401 dia. rivet sets to match the head shape of the rivet being set. The tail of the rivet should extend
1.5 times the diameter of the rivet before it is set. A flat bucking bar is used on the tail of the rivet and the gun with the proper rivet set is held on the rivet head. Hold the gun perpendicular or you will get a " happy" rivet, The set will make a smily on the metal next to the rivet head. As someone else said, you want to hit the rivet with a reasonably hard blows so you dont work harden it before it is properly set. When the rivet is set the tail end diameter should be 1.5 times the diameter of the rivet and not be crooked or oval.If you have only a couple of rivets to set you can put the rivet set in some type of holder of vice and lay the piece to be riveted with the rivet in the rivet set. Hit the tail of the rivet with a hammer until it reaches the 1.5 diameter of the rivet. Make sure the sheets your are riveting are tight together. This is where Klecos come into use.
As far a annealing rivets, it depends on what material the rivet is made of. Aircraft rivets for the most part do not require annealing. The most common rivet in aircraft use is the 2117 material. These require no annealing. The ones requiring annealing are commonly called " icebox rivets" because after annealing you either use them right away or put them in the freezer to keep them soft until you shoot them.