You definitely want to put core back in, solid epoxy would be very hard to do and pretty expensive. Balsa is fine if that is what is readily available. I think one of your good east coast sources is Jamestown Distributor, so you can check them for prices. I have used
Fiberglast because they had the selection of the kind of materials I was looking for and lots of information to go along with that material and they have 3/4" end grain balsa core.
Looking at your image I think you want to try and sand the inner skin some more, if you haven't already. Remember the bond strength is only as good as the material it is trying to bond to and that applies to the outer skin too. You will be wanting some of the low density filler too so you can fill gaps between core sections and square bits. I found it easier to cut out squares to fit the core. Just take some blocks of core, trace around it and then chisel the old stuff out until the new core fits in place.
You are on the right track and making headway. Feel free to text me directly if you have questions 503-369-5218 I really don't mind stopping sanding over my head to answer questions and commiserate.
