For the touch-ups, I would mix different colors of Testors paint a few drops at a time in a thimble-sized vessel.
Then use a toothpick instead of a brush. Allow each droplet of paint to flow to the inside edges of each chip, but absolutely do not overlap the paint past the edges of the defect, which would only make the defect larger and much more conspicuous.
A second coat of each touch-up is an opportunity to adjust your color blend, so keep track of how many drops of each color went into your first paint mix.

I don't recall ever seeing a UO14 before, I'm assuming the bike is 14 speed?

Anyway, Peugeot was always good at making their basic models feel lively on the road, especially from 1979 onward.
It looks like all Japanese components(?) but I,m wondering where the frame was made. Looks like 1989 or so(?).