If you have the time and patience, you can minimize the "scab" look. You'll need fine grit sandpapers (800-1000, 1500, and 2000) and a small sanding block (maybe 1" x 2"). Something just small enough to be flat against the surface you're working on without being affected by nearby curves.
First, lightly feather the paint edge so that it isn't jagged and sharp with 800-grit paper. This helps the new paint stick to the old surface and will also make it less visible afterwards. Wipe any dust off with a clean cloth.
You can apply the touch-up paint in successive layers until it is built up to the original thickenss. Let it dry throrughly, then use the sanding block to smooth out the repainted areas that are too high. Paint & sand until the whole repaired area is smooth. Use a light touch and use sucessively finer grits. Finally use buffing compound to bring the shine back.
For tiny rock chips that have rust in them, I would highly recommend a Scotch product called a Sanding Pen which is a plastic pen that holds a small bundle of fiberglass strands you use to abrade the rust away. It works great at removing all the rust without having to sand down a huge area.
Hope this helps!
[edited]
Here's a link to the sticky at the top of the forum that gives some more detail...sorry, Brian for stealing your thunder.
http://www.automotiveforums.com/vbul...=424744&page=3
