Alan, If your forearms are aching, you are probably holding on too tight...
I tend to hold the brake hoods at a slight angle with the backs of my hands pointing out at around 10 o'clock and 2 o'clock and yes in the past I have developed blisters and even a couple of warts in the area around the base of my thumb.
I don't tend to use the drops much - on the tri bars instead
If you don't have anything on your handlebars, (lights computers etc) then alternate hooking your hands on the tops of the bars - knuckles pointing forwards.
One tip for bike handling skills is to find a quiet industrial estate on a sunday morning and do laps round it. You can practice corners and brake etc with little traffic around
We blogged a hill climbing session which may help also
http://insidetriathlon.org/?p=64
If you haven't already, think about clipless pedals - they have a learning curve but make such a difference
Also - have you had the seat and bar height checked by a "proper" bike shop or just a bike shop "supermarket" staffed by spotting youths?
The former is an essential
hth - happy to help further