I have a finished basement, with painted sheetrock on the walls. One
of the walls got water damaged a year ago, due to outside flooding.
The exterior problem has since been fixed, and everything is now dry.
The result, however, is a fair amount of minor "bubbling" on the
sheetrock.

Can this be sanded down and re-painted, or do I need to have new
sheetrock installed? I thought I could just have it sanded, but a
friend of mine said that sheetrock has a top layer of paper, and you
cannot just sand this down.