I have used Mr Surfacer 500 liquid dabbed on with a brush to fill small gaps and seams. When I scrape/sand the area tiny air bubbles are visible in the compound which were not present on the surface. What gives?

David,
Mr Surfacer 500 is relatively viscous so if you are using a brush to dab it on you're probably getting a lot of air trapped underneath. I typically use a toothpick or needle to apply it a drop at a time, making sure to work it down into any cracks I am trying to fill. Mr Surfacer also shrinks quite a bit as it dries so I find it's best to build it up in layers, allowing each layer to cure before adding the next. If you have a large void to fill you'll most likely want to either cut some scrap or use putty/epoxy to fill most of the void before reaching for the MS500.