If you see bubbling pain on the front lip of your bonnet, I recommend you let alone.
Here's what happened when I did a little bit of digging...


There seem to be about two layers of protection on the front lip, beyond the paintwork, that is. There is a plastic-like layer, and then a layer of what looks like zinc, before you get down to the steel. This is why it's probably a good idea to leave the bubbles alone - the upper layers are hiding the cancerous mess beneath!
As you can see in the pic, the steel was rotten to the core - I was actually able to poke a screwdriver all the way through to the inside. Pretty awful, really.
I painted on some anti-rust as best as I could (there was no way I was going to see an end to the rotted mess), filled it in painted it over with some touch up paint. I didn't see the point in doing a really nice and careful spray job on it, since it's only going to come through again in a couple of months.
Needless to say, I'll be leaving the rest of the bubbles alone.
I guess with the design flaw in the 406 bonnet its just a matter of time before the whole lip rots through. Sad.