The deal with coatings of any kind is that you need to get a good "anchor profile". That is kind of roughing up the surface so the paint has something to adhere to. I work in the PetroChemical industry and we use coatings for several different applications (high temp, high press, corrosion resistance, etc.). I'm not a coatings expert, but the anchor profile is one of the basics. Also, you will want to follow the manufacturer's directions for application, and if that includes baking it to cure the coating, then that's an important step in making sure that the coating cures correctly.
The flaking and blistering are symptoms of a coating system that was not properly installed. If you want to do the coating on the cheap, it probably won't hold up for long. Have you looked into using the header wrap, I've seen it on a couple of bikes and it looked good. I don't think that you have the same type of application issues with the wrap either.
Just my .02, hope it helps.