wafflycat said:
If I were doing it as a DIY jobbie, I'd strip it back to bare metal, prime it then paint it.
+1. I've painted a few bikes in the past, and sanding the old paint never works as well as taking it right back. It'll chip much more easily and end up looking rubbish. If you're using enamel paints you might get away with it, but if you want to make a good job get the nitromors out and get to work. It doesn't take as long as you'd think. Make sure you wear gloves, and especially safety goggles. You don't want even a tiny amount of that stuff in your eye unless you fancy going blind.
Important things when painting your bike are:
1) Get your primer and paint from the same manufacturer. They'll be designed to work together and have less chance of going wrong than if you mix and match.
2) Lots of thin coats rather than fewer thicker ones. The more the better.
3) Lightly sand between coats with a fine grit paper and rub it down with a tack rag. This will help keep the finish nice and smooth and helps each coat adhere properly. Obviously skip this step when clearcoating.
4) Take your time. Spend a couple of days on the painting if you can and do it somewhere warm. The warmer the better. Rattlecan paint won't dry properly if it's cold. Once it's finished try and leave it in a warm room for a couple of weeks for the paint to harden properly. It's a PITA having to wait but this step makes a big difference in how easily (or not) the paint will chip.
I quite enjoy painting bikes, but if all the above sounds like too much hassle, then as others have said you might as well take it to your local powdercoat place. You'll get a better, tougher finish for similar money though you might be restricted in what colours you can get.