I've heard of what this describes, but it was never referred to as blistering. Usually the hose swells and collapses.

Triple, check to see if the hose collapses or swells when the brake pedal is applied and released. If it doesn't, I would be surprised if this fixes it.

When it happened to me it was undetectable from the outside. The failure occured inside the metal reinforced line so all looked fine by visible inspection, which led me to replace the caliper only to have the same problem. I had to remove the hose and shine a flashlight inside to see the collapsed area.

When you bleed the caliper, was the fluid flow normal?

Yeah, the master cylinder creates enough pressure to push fluid through the damaged/collapsed part of the hose. Visual inspection was the only way to tell (well, that or replacing everything and still having a problem).