Should you elect to have the frame powder coated, the shop will probably sandblast the rusty areas to eliminate the rust. That will result in pits that will be visible through the powder coating itself, as the process does not build to fill, so to speak. I'm sure the shop will know to use a filler that is conductive,(such as Lab Metal, which is designed for that purpose) otherwise the powder will not bond to a non-conductive filler.
Good luck!