It is called foam putty. It seems like it might work. It is $6.70 + $6.80 shipping for a pint at amazon:
Amazon.com: Foam Putty, Pint: Toys & Games
Here is the product description:
* Foam Putty's special formula makes it ideal for use with foam.
* The consistency and characteristics of Foam Putty are similar to foam, making sanding, carving and painting easy.
* Fill cracks, sculpt or carve, sands smooth.
* 16 oz. plastic container with locking lid.
Does this sound like what I might need?
I did some Google work and it looks like you can make your own:
eBay.ie Guides - Homemade Foam Modelling Putty
Anyone know how to make foam putty/magic foam? - Yahoo! Answers
Thoughts?