For fine areas around lugs and around tube joints, I use a Dremel tool with various metal brushes (brass being a softer one, stainless and carbon steel being a little harder). The same can be done with one of the little metal bristle (again, brass and copper are softer while steel is harder) toothbrush-type brushes available at the hardware store. I use WD-40 on the brush because it's cheap, displaces any moisture, and helps break up the rust. Wear eye protection, especially if you opt for the Dremel.
Given the amount of rust in the lower areas of the frame, I'd be inclined to pull the cranks, and then clean and fully re-build the bottom bracket. Use as many original parts as you can, but anything pitted (whether from rust or wear) should be replaced with smooth parts in terms of the moving parts of the bottom bracket. I would not rely simply on dripping oil down into the bottom bracket on a frame like that, given that there was apparently moisture in the areas of the frame not far from the bottom bracket. The bottom bracket sees a fairly high number of RPMs, so you don't want rusted or pitted stuff there.