If you really want to preserve the bike, a repaint is probably necessary. I redid a frame that arrived in similar condition, and I documented the bare frame very well in this thread, where you can see what kind of rust pitting is likely taking place under that paint.

Velocals used to be a good source for decals, but they closed up shop earlier this month. They left a page of links to other potential sources, though (scroll to the bottom): https://velocals.com/