chesecloth is available from the auto shop near the cleaning stuffs....it's a soft woven cotton.
for the bugs...get a blue car wash ENJO mitt - they are fab! (www.enjo.com.au) just a bucket of water and no chemicals...so easy and so quick...works on the same principal as the towel trick being that the water softens them for easy removal but a lot less mucking around and much quicker. SABCO also do a cheaper version in Woolies and Coles...just as good I reckon. They wont scratch your car (I use mine on our tiger mica SS paintwork) they also get the lil pesty things off the number plate. (You can also use the glove to wash your whole car with)
SOME paint marks can be removed by a good cut n polish ....but this all depends how deep they are and how much paint is there.... if it's just light surface then most definately will come off
good luck 
P.S. the wet towel trick is to cover the bumper and number plate with a wet towel and keep wetting the towel until the bugs are soft enough to be washed away....here is another thread about the same problem Bug Stains....
If I wanted to hear from an arsehole...I'd FART