I bought a 1968 Phillips 3-speed a few weeks ago and I'm trying to "restore" it the best I can. The frame has some nicks and some pitting and rust. So, is there anyway to fix up the frame without having to sand it down and repaint it? When I bought this bike, I thought that I would be able to get it looking semi-new again. The bike is worth very little, so putting a decent amount of money into it wouldn't be the best idea. I realize I won't be able to make a masterful restoration, but I'm still going to try to fix it up in a cost efficient way...
Also, have pics if needed. Appreciate any help!

The only 100% effective way to eliminate corrosion is to grind it out. If you just want it to look pretty check out a hobby shop for matching model paints or a cosmetics counter for matching fingernail polish. Before you put on the touchup paint hit it lightly with a wire brush.

Thanks damnpoor. As I said the bike isn't worth much already, but wouldn't either grinding it out or touching it up diminish value?

Read the various rust threads on Oxalic Acid, then decide. Anything abrasive will remove everything: rust, paint, and good metal. Treating it chemically is the only way to remove just the rust.