I think the boat
: has potential to be attractive, but I think it's going to take some time
: to get it there. Can I just sand it down & varnish it? Can I sand it
: (at least the real thick spots) w/ my ROS?

I agree with you Mike, that squirt boat DOES have potential. I believe your idea of sanding with your ROS is a good one, but do a test on a part of the boat that has the milky finish...see how deep it goes, because if it's only on the layers of fill epoxy, you may get away with only sanding off the milky part...however, if the defect is part of the wet out coat, then you may have to sand the old glass off and re glass...then varnish as usual...but by the looks of it, your work will be worth it!
Cruz, W.F.