Thanks for the prompt reply with that information. I'm pretty certain I know what your problem is now. You have bought the best exterior paint for cedar shingles and the primer you have used is shellac based, and is non breathable as a result. Roofers who build roofs from cedar shingle cladding contend this material will last around thirty years if looked after properly. Due to the fact this material was last painted in the sixties, and albeit a durable type it is made of wood. I operate a business in the UK restoring and painting architectural joinery for listed buildings from around 100 to 500 years old. Any wooden substrate, whether hard or soft wood should be coated with flexible materials every seven to ten years. The only reason blisters appear in paint is because something is trying to escape from that substrate.
In this particular instance, due to the fact these walls haven't been painted for so long, and I also imagine there is exposed end grain, (which acts like a sponge for moisture), the blisters are moisture content trying to escape. The optimal moisture reading for cedar to be painted without these problems occurring is around 12-15%.
My solution to remedy this problem, provided none of the wood has wet or dry rot, is to purchase a moisture meter initially from a local hardware outlet, digitally measure the moisture content of the wood, especially where the blisters are, & I can almost certainly guarantee the readings will be between 20-45% at the very least.
If this is confirmed, you will need to wait to remedy your problem until the height of summer and then redo the job. When the temperatures are highest the moisture content of the cedar will be the lowest.
Use your orbital sander, firstly with 60 grit as before to virtually strip the previous coatings, then 80 grit, then finally 120 grit for the smoothest substrate to paint for aesthetics. Moisture test the wood after this process and wait until a couple of hot days have passed to further the drying process, and when you confirm a reading of less than 15% or more ideally 12% or lower just paint the entirety of the walls with the Behr paint without any spot priming. I would also (due to the age of the material) recommend three coats instead of two.
I hope my answer wasn't too long winded and wish you all the best.
God bless and have a great weekend. Cheers