I like rust mort for my commercial/industrial applications. Under a toy, you have to be careful as it is caustic. I would use it first, paint, and then Fluid film. Fluid film is new to me, but my research has shown its used in industry, and has been for years. I was talking about it this weekend, and a friend told me, that NASA uses it, so I figure it must be pretty well thought of, by the rocket scientists.
For some of the rust I see on eastern toys, I would consider grinding out the old rust, rust mort around the area, and welding on plates.
It not cheap, but it works great.
http://www.amazon.com/SEM-69501-Rus...UTF8&qid=1444660265&sr=8-3&keywords=rust+mort
Of course the best plan would be move west, buy a new rust free toy, and Fluid film it...
PS: your project is looking good...most people do not pay any attention to the rust underneath until they have a frame failure.