Yup, a good candidate for singlespeed. You can get the rust off the bike then prime and repaint it. Singlespeed/fixed gear bikes are popular and you'd be able to sell it. I'd tape off the headbadge, it looks cool.

The rims look to be in good shape; some steel wool and WD-40 will clean them right up. Same for the brakes; take them apart, scrub the rust off. Polish everything with some nice carnauba wax for a great look and protection.

Sheldon Brown has info. on converting bikes to singlespeed cheaply. Check out their LINKS and more LINKS

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Be careful when removing the headset/fork and the bottom bracket. Ball bearings may go flying everywhere and you'll need them.