Here are a couple of options that I am considering.
1. Strip paint myself and respray in current colour scheme ( I do feel confident on spraying the frame)
2. Powercoat the frame white and add black decals.
The paint is good, just clean it and polish it - don't T-cut it, that's too severe, but a good polish has some fine abrasive elements that will remove minor imperfections and it'll look great.
Current rebuild plan:
1. Replace gearset with new Deore LX equipment
2. Replace stem, Saddle & seat stay.
2. Fit some retro Pace forks
If the gears work, I'd keep them. You need a better stem and seat post, every bike needs a Flite and that's probably a steel handlebar that weighs a pound - save over half a pound with an aluminium one. Dynamically, the biggest improvements you could make to that bike would be:
1. fit handbuilt wheels - lighter, tighter, faster in every way. If the ride is too harsh, get fat tyres and maybe a Stan's tubeless system so you can run low pressures without getting punctures.
2. V brakes
Or: put the money towards a lightweight Kona rebuild?