Any good Powder coating shop will media blast the frame and parts prior to powder coating. Also they will plug the holes and mask off threads prior to coating. If you plug them with silicone, you will just contaminate the job.
Make sure your frame is straight and free from dents. Otherwise it will look bad. As far as rust, when i had mine media blasted, I was quite impressed as there was no paint, rust, or anything but bare metal.
I am curious, how did you get out the swingarm bushing and is it in good enough shape to replace or did you find replacements?
1971 HKO Metallic Irish Green
1974 K3 Candy Topaz Orange