Personally I would'nt sand down the paint, It can leave flat or uneven spots from trying to overwork more corroded areas. Plus its almost impossible to remove dirt, rust or oxidation in all the nooks and crannies and lets not forget the pitting that rust can hide in. Ive got the badge, balloon and swirly hat from learning the more costly and time consuming way with unsatisfactory results.
Get it blasted, It will get rid of all the crap off the frame evenly, but only either bead or a very fine shot blast otherwise the finish will be affected with a more coarse blast. personally I have just sent my Kona frame off to be blasted and powder coated for the princely sum of £35. If your'e unsure, my Lava Dome frame will be back next week and posted on retrobike with the results if your interested?
Would love to see your results. Unfortunately I'm in Canada, Toronto to be exact. And I haven't found too many mention of people stripping and repainting frames/forks, at least not at a low cost.