UPDATE: Took this machine to the FW maintenance class taught by Linda Scholten at the NQA show in Columbus today. Linda took one look at it and said "somebody sure abused the finish on this machine". But she assured me that it is not aluminum rot, just a lot of pitting and flaking of the finish, and explained to me how to sand down the spots and feather the edges before using auto paint to touch it up and then French polish technique. Since I already have a FW in better condition, it's going to college with my DD this fall (she's been using that 40 lb Kenmore and is thrilled to have her own FW). So we'll try touching it up and if that doesn't work I'll think about having it painted for her for Christmas.
By the way, Linda is in Oxford, OH and specializes in cleaning and repairing FWs if anyone in the area needs a repair person. That's only about 1 hour or so from where I live, so I think I've found my new repair person.