Well, today I took the lid off, hosed it off and there were also some dirt particles near the O-Ring which didn't wash off easily (they were embedded in the lube). Put the basket back on, fired up the pump, and the pump worked out most of the air but there was still a small bubble (about half the size as before). I was fine with this, so I left it, and came back an hour later and the bubble was gone! So, I think it was either:
  1. Dirt on the O-Ring allowing tiny amounts of air into pump, or
  2. The basket wasn't aligned quite right with the inlet hole, causing all incoming water to flow through the basket mesh before even entering the chamber. Maybe this caused some cavitation or something :-) When I replaced the basket, I aligned it correctly.

In any case, I am now pumping bubble-free!