I used to be a professional spray-painter and I wrote up a big long article on how to paint bikes, but I've lost the link so here's a short version.
I've used Hycote spray paints and I think they're my favourite. Obviously rattle-can paints are hard to work with (they need a lot of wetsanding to get them smooth) but Hycote is the best I've used so far. And it's cheap on ebay. Anyway:
1. If the existing paint is chipped, flaky etc, remove it with paintstripper. If it's good then go to step 2, provided that the red oxide primer doesn't react with the existing paint (spray a bit, leave for a couple of days and check)
2. Scuff frame with 250g paper, clean with thinners, leave to dry. It must be spotless
3. 2 coats of red oxide primer - this helps stop rust. One large can should do this. Dry overnight in a warm place
4. Fill in any dents with filler and sand. Sand frame with 600g paper (wetted with slightly soapy water (i.e. a drop or two of washing up liquid in about a litre of water))
5. 3 coats primer. Grey for most colours, black for dark colours, white for light colours. Dry overnight. 2 cans for this
6. Colour - a 6 pack of cans off of ebay is ideal, leaving you with a couple of spare cans for touch-ups later. I've found that rattlecan paint comes out tougher if you do it in two goes - two can's worth of thin coats (20 mins between coats), then wait overnight, wetsand with 600g in the morning, then the other two can's worth of thin coats, again waiting 20 mins between coats.
7. If you've picked a solid colour, you can move on to finishing and polishing (see step 9). If you've gone for metallic or pearlescent or anything fancy, it'll need a lacquer (step Cool. If you want to add decals, lug lining, box-lining or other patterns, put them on before the lacquer (even if you have a solid colour you can lacquer over it if you want to give the decals a layer of protection, or give a really deep shine to your bike).
8. Wetsand frame with 600g, wipe with clean rag, and do lacquering in the same way as painting in step 6.
9. Finishing and polishing is the fun bit. Give your frame for a full week in a very warm place to cure, or maybe two weeks if it's in the shed or garage. Then wetsand with progressively finer paper, starting at 600, then 800, then 1000, then 1200, then 1500, then 2000. The aim is to remove the ripples and bumps you get from painting to get a very smooth finish. The final step is polishing, which on a bike, is easiest done by hand. Get some polishing compound (T-Cut is too coarse) from Halfords/paint supplier/internet (G3 is my favoured brand) and use as per instructions. You're aiming for a glass-like finish. You can now assemble your bike!
Then you need to protect your paint. Normal Turtle Wax does a great job. Leave it for another week before waxing it.
Tips
Always use a sanding block. A bit of stiff foam (like a brand new washing up sponge) is good because it curves around the bike's tubes really well.
Make sure your paint and your frame are warm before painting. Pop the cans into warm (not hot!) water and keep the frame inside by a heater. It'll make the paint settle much more smoothly.
Make sure each layer of paint is absolutely perfect before moving onto the next one, and take your time! You can always go back and repaint a section if you sand through to the previous layer.
Don't let anything touch your frame for a week after you've finished painting. Even if the paint seems hard, things like brake calipers or band-on front mechs, or the floor that you're resting it, on will squash the paint over time. I stick a couple of old wedge-type quill stems in the seat tube and steerer tube (shimmed with old inner tube and expanded out all the way they hold the frame securely) and hang the bike from those.
With some care, it's easy to get a paint finish that's better than any mass-produced frame I've seen, although not as hardwearing as stove-baked enamel or powdercoat. Anyone who says home-painted bikes look rubbish just doesn't know how to do it properly! It doesn't matter a single jot HOW you apply the paint, whether it's from a gun, a can, or sprayed from an old bicycle pump - it's the prep and the sanding that's the key.
If you do want the ultimate cheap hardwearing finish, nothing beats powdercoat. For 40 to 60 quid it's as cheap as DIY. The finish isn't great (looks fine from afar but it's not very glossy and full of ripples) but it's so tough you'll dent the tubes before you chip the paint. No metallics (you can get lacquers with sparkles in it but I think it looks horrible) either. Also powdercoaters will only do a single solid colour on a frame - but you can easily paint over it to do bands around your seattube or lug-lining etc.
