I throw them in the secondary loose and then use a ss mesh hop ball on the end of my Autosiphon out hose to keep them out of the keg. I punched a hole in the ss mesh so the hose fits tight into the ball. Works great.
I only dry hop with whole hops and I do it in a keg with a stainless braid over the intake of the liquid dip tube. Although I’m considering getting one of these for using pellets: http://www.stainlessbrewing.com/Dry-Hopper_p_155.html
I had this exact experience the one time I tried this. Have not tried since, but I have not needed to because my keg DH procedure works great.
I’m getting a little off-topic here, but those bubbles were probably CO2. When you siphon, the pressure in the siphon tube is lowered, so if the beer is saturated with CO2 it comes out of solution and appears as bubbles. The muslin bag on the tube probably was restricting the flow a bit, especially once it was partially clogged with hop particles, increasing the pressure drop.
Bag 'em in a keg. Drop 'em in and cold crash in a bucket or carboy - or wait another week or two.
