I agree with you that excessive sanding would take away too much wood. Looks like some insects were in the wood at some time. You could gather some sanding dust from your project (maybe sand some of the offcuts from the goblet), add a little glue to the holes in the goblet, then rub the matching dust into the holes, filling them. Once the glue dries you could then sand to smooth things out.
As an alternative to hiding the holes, you can highlight them, by filling them with a contrasting material. For some projects just filling the holes as they are results in an interesting result. In the case of your goblet, turning a recess where the holes are, and then filling that would probably be a better choice. This would result in a contrasting circle where the holes used to be. Of course this is only an option if you can still mount it on the lathe.
Options for the fill include:
* Wood filler putty
* Dry wood filler powder mixed with a dye
* epoxy mixed with a dye
* powdered metal solidified with thin CA glue
* specialized filler products such as InLace