Some people will apply masking tape around gaps before filling with epoxy. I will often fill the gaps immediately before fiberglassing. This makes it so the epoxy smeared into the wood grain is not dry and still lets new epoxy soak in. This works fairly well for avoiding the discoloration, but is not 100%. If you want to do it "right", you should probably mask first. You can peal the tape immediately after filling the gaps. Wait for the epoxy to dry then lightly sand everything smooth again. I suggest masking regardless of the type of putty you use. They all tend to plug up the grain a bit.

A well shaped wood sliver will probably look better than putty, but it is substantially more work to get it right. If you don't get it right it won't look any better and may look worse than putty.

: Be careful when applying the epoxy as filler, I just got past this step and
: didn't realize that the epoxy on the wood surrounding the filled area will
: cause discoloration if not completely removed back to the bare wood. When
: I applied the filler I just spread it on with a scraper and ended up with
: the wood covered with a very thin layer of epoxy in an area about 2"
: surrounding the hole I was filling. This soaked into the wood and took a
: lot of scraping and sanding to remove.
: The advice I wish I had prior to filling the holes with epoxy was: Don't
: worry about gaps smaller than a 1/16" or so and use wood slivers as
: much as possible without any epoxy, just your regular wood glue. The fill
: coat or first layer of fiberglass will cover any smaller gaps just fine.

: Good luck!