Quote - Use the clouds filter...
can I then:

a) somehow arrange for this layer to have a gradient of visibility with the layer more visible at the bottom of the image, and fading to total invisibility at the top of the image

You need a layer mask for this. Once you've done the clouds filter on a new layer, set that layer to screen blending mode, which removes the black and leaves only the white. Then click the layer mask button to add a mask to the cloud layer. Select the gradient tool and make sure the selected gradient is black, white and that the gradient type is linear. Now draw a vertical gradient from the top of the mask to the bottom. You should see the clouds fade out at the top of the layer. If they fade from the bottom, undo and draw the gradient up instead.

Quote - and or:
b) somehow get an eraser that will remove parts of this layer to let the image below show through but have the eraser use a soft edged brush effect and not jump around like it does now,

To do this, select the eraser and ensure it's set to brush rather than block or pencil. Choose a soft brush from the brush palette. Press F5 to get the brush editor, check other dynamics and in that tab set flow to pen pressure. I usually set size jitter in shape dynamics to off, but that's just a personal preference. You should find you have a much more responsive eraser; it may also help to turn off the visibility of all other layers as well, to speed up the display.

Steve