Oh I remember those now. Nice bike actually. There was a briefly lived trend for clear cable housing around that time. (84?)

I suggest putting a bit of naval jelly on those rust spots. It should dissolve the rust and let you see the extent of any real damage. They may be cosmetic. Fortunately those are not in critical areas. Try to get a peak inside the tubes and BB shell also.

That is a nice frame and worthy of refinish IMO. Since the original paint has failed to the point of making the bike unusable, there's no 'moral' reason not to refin.