Re: OK, so I'm Sanding My Bottom...
What you have is very thick old bottom paint (the red) and ground out blisters ( the craters). Remove most of the red stuff with your sander. Fill the craters and holes with epoxy mixed with low density plastic filler, put it on with a putty knife. Sand it smoothish, no neeed to be obsessive about this on an old boat. Put a layer of thin epoxy over the filled areas. Do not try to seal the boat with epoxy, it will not work. Then put on your bottom paint and go sailing.
Blister "repair" is almost always a waste of time, fixing something that isnt broken. Ignore any more blisters that are not broken open.