Okay, that is a very traditional batting -- the type that antique quilts were made with. When you wash the quilt, the whole quilt will softly crinkle. This is the look you get with traditional batting. I personally love this look.
This type of batting is going to be thin (package says 1/4" loft, which is thin) and look as if it has thick and thin spots. There is nothing wrong with the batting; this is traditional batting. The "cotton classic" in the name indicates this. Fairfield is a reputable brand.
How hard is it to hand quilt? The batting I usually use is Mountain Mist Blue Ribbon cotton batting, which is a traditional batting similar to the one you purchased (but *much* less expensive, I think!). It was hard to hand quilt because there is so much drag on the needle. Quilters Dream Request is supposed to be much easier to hand needle; not sure if it crinkles up the same way when washed, though, as I haven't used it. Quilters Dream is a newer manufacturer of batting, and theirs is needlepunched. Fairfield and Mountain Mist have been in business for many decades; their "classic" battings are traditional battings.
If you prefer a high-loft, more modern, comforter type look, the batting you are using will not give you that.
Personally, I would just finish hand quilting with this batting and then wash the quilt. I love the way a quilt looks with traditional batting.
Next time, if you want more fluffiness, try Hobbs Heirloom 80/20. This is a little thicker than a traditional batting, probably easier to hand-needle, and probably closer to the look you were expecting. Most of us are very accustomed to the polyester comforter look these days; the bed coverings we buy from the store are invariably high-loft polyester. Hobb 80/20 is sort of a middle ground between the traditional 100% cotton look and the modern, store-bought 100% polyester look.