Well Woody I gotta cast my vote with Joe here, ya gotta get ALL the rust out. It makes no sense to go through all the work and expense of painting and have it come back to bite you in a couple of years.
If it were me, I would definitly use a chemical to get all the rust out of the pockets/pits. Encapsulating the rust just seems to me to be a band-aid except in this case the wound tain't gonna heal up.
Metal prep or metal conditioner, i.e., phosphoric acid looks like a must and don’t skimp, use a conversion coating after the conditioner. Better yet this would be a perfect candidate for chemical dip if there was one near you. I just ordered a Copy Cad kit from Caswell and I asked about removing the old plating from the parts. They recommended using a 50/50 Muriatic acid (weakened hydrochloric) bath to remove it and any rust. You might try that in small area and inspect it with an eye loupe after cleaning if the metal prep doesn’t do the job.
Sand blasting is out in my opinion, it isn't going to get down into the very smallest pits unless you blasted away everything around the pit, its just air sanding you know. Of course if you did blast by the time you got to the bottom of the pit the metal would probably be warped in the flat areas.
You got the build up all figured out so no need to say any more on that. Just one thing on the acid etch primers. Don’t get lulled into thinking that this is what they are formulated for, they are all too often misused. They are designed to be used on the new metal that has a galvanized coating not for bare steel. Just read any of the spec sheets from any of the paint manufactures. There is no need to use an etching primer on bare steel if it has been prepared properly. That would be with Metal conditioner and a conversion coating.
Denny Graham
Sandwich, IL