The bubbles are indeed from the casting process. Mileage varies on technique, but I use regular old Bondo for that kind of filling. I also use Magic Sculpt epoxy putty, though mainly for gaps and resculpting detail. It all depends, I suppose, on the scale of the figure and your finishing skills in tight spaces.
For the Bondo, I mix up a little bit and then press it in with my finger using a bit of pressure, filling the holes as best I can. At this stage I don't care if the holes are totally filled, I just want some material to build off of with consecutive layers. I also don't want excess putty to clog details, hence the pressure as I lay the putty in. I then wipe off as much excess putty off of any detail as possible with my finger. A little solvent cement will soften the Bondo and help to clean it off. When that's dry, I wet sand if neccessary, using 400 grit sand paper, folding it into what ever size and/or shape I need to get to the offending areas. With that done, I then mix another small batch, this time focusing on filling the bubbles. I lay it in with something like an exacto blade, and then pad it down slightly if needed, to spread it out and fill in the hole. Then comes more sanding with 400 grit. I may go over it with 600 grit, to kill the scratches from the 400, but I might also just skip to spraying the figure with a primer to see how things look. You have to be careful here though, because you don't want to soften or eliminate detail with excess paint, especially if you still have some sanding or puttying to do.
As to the loss of detail, like I said, I use epoxy putty to resculpt it. Any epoxy putty, like miliput, or Hexcel A+B (I think this one's under a different manufacturer now, but when I used it it was made by Hexcel) will do, though I use Magic Sculpt. The putty takes about an hour to set, and two hours to fully cure, so you have some time to work.
For resculpting details, I would mix up a small ball, 1:1, and then let it set for 10-15 minutes, 20 minutes at the most. Any sooner and it will still be a little too soft and gummy to take good crisp detail. After about 45 minutes to an hour, it will start to set. While shaping the putty isn't recomended at this stage, as it will be firming up (and while still maliable, it will begin to develop "memory", undoing whatever changes you might have just made), certain other details, like scribing hair and uniform texture are best rendered at this stage. Depending on the amount of rework you need to do, you'll want to work on areas at a time, rather than trying to do it all with one wad of putty. If you just have to resculpt some belts or straps and such, it shouldn't be a big deal. A little putty, some shaping with a knife blade or brush handle and you're good to go.
Oh yeah, I coat my hands lightly with vasaline when I mix it to keep it from sticking to my fingers. I use water to smooth out and blend fresh putty, while vasaline works better when the putty is firming up, especially to get rid of finger prints and what not.
Hope that's of some use. Good luck!