How do you lay the image on the cake with out it bubbling. I used wafer paper? Is it the paper or my technique. Should i use the more expensive paper made of sugar rather than the rice paper? See attached image

Yes you should use the icing sheets because the sheet will meld into the icing making it easy to cut through. Wafer paper is not easy to cut through Sometimes you have to take if off to cut the cake.

And just set one side on the cake and use a spatula to smooth it on.

Grt Thanks so much for your response! Actually I left the cake overnight and when I woke up the next morning all the blebs were gone, but there was some discoloration. Guess the wafer paper takes more time to absorb.

When applying an icing sheet, you want to apply it from the center out. You will have to flex the icing sheet in half to find your halfway point and line it up where you want it on the cake. Begin laying the image out and smooth the icing sheet with your DRY hands making sure there are no gaps between the icing sheet and the frosted cake.

If you have a warm cake, air will come up through the cake, so make sure before applying the image that the cake is completely cooled and the icing is moist.