Thanks for all the advice. I'll definitely try the Oxalic acid/Scratch X combination, especially now I know this bike has some fairly rare parts. If I do this and there are still lots of ruat pits, should i touch them up with some paint and and artist's paint brush? If so is there any specialist paint i should use? I don't just want to do this for asthetics but also to stop any either rust. And would it be so bad if i replaced the transfers since they're almost worn away completely. I'll keep the wherls if I can, because I quite like the 32/40 spoke style. Even if they aren't originals.
I took another look at it this morning and if I don't have to replace the wheels all I'd need is a need are: brake cables, a Sturmey Archer gear cable, inner tubes, tyres, handlebar grips, a seat post and a seat (and maybe new brake levers) that's comfortably under £150 including specialist tools, chemicals and polish; with £59 of that going on the seat. That sounds like a pretty good deal to me!