Bill wrote:

The house is inspected annually by Orkin & I pay them ~$200/year for
continued insurance, which is transferable. The total area damaged is
probably 18 inches square, in 5-6 locations inside an area about 4x8 feet.
Spackle/prime/paint was what I had in mind, I was just wondering if joint
compound was the best for this or if I should use something like one of the
"plastic-DAP" type products. Basically were talking about a depth
equivalent of the thickness of the paint & drywall paper coating.

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Bill wrote:
As I clearly said, the house is free of termites. I'm not talking about
"concealing" anything. Termites are endemic to this area and the holes
drilled in the basement floor & walls, garage slab etc for treatment are
plainly visible. My question concerns the best manner for repairing the
drywall damage.

It wasn't clear to me ) Free, as in professional inspection with no
bugs found? Good! How large an area, by the way? Probably should
remove the paint (all that is left) over the damaged area, spackle,
prime, paint.

gee how about the wooden structure behind the sheetrock??? was that also
replaced???? with their insurance policy... dont let them just spray for
the bugs if you got a policy with them......