I've used it with talc, and it works nicely.
I'm currently experimenting with acrylic indoor primer, which is not only easy to sand, but doesn't settle out the way that talc does and is really, strongly white, so I can see where it is (I have a real problem with sanding through my sealer coats). I've only done this on one plane, and I did it over Minwax Polycrylic, and I did have adhesion problems to the Polycrylic -- but that's my fault for putting too many innovations in a row into one paint job.
I know that Allen Brickhaus recommends Minwax polycrylic with fiberglass as a base, then spackling compound (thinned, if I recall correctly, with water), then spray-bomb. He's got an article called "finishing the Oriental" in some 2010 issue of Flying Models -- but I cannot remember which month.