I just finished painting my Surly Cross Check and I think it came out great. the paint is from Dupli-Color and is called Metal Specks.
http://www.duplicolor.com/products/metalspecks.html They have one in silver which is similar to a bare frame in color.
Here is the color...
As for your bike, I would use a paint stripper to get the frame down to bare metal. Then I would use a
scuff pad, they come in red (general purpose) and gray (ultra fine). this will get the rust off and give the steel a good finish to hold the clear. it also gives the frame a clean finish to it looks better.
As for the sparkle, apply the clear and using a fan about 5 feet away, throw the glitter in front of the fan and let it fly onto the frame, this will give an even finish. then apply a couple of more coats of clear.
Do not use lacquer because it will melt any plastic glitter you use. if it's metal glitter, then it should be OK. Dupli-Color makes a great clear. goes on smooth and glossy.