I usually spray the engine down with de-greaser and brake clean. Scrub all the really dirty spots with a wire brush, and pressure wash. After the engine is clean of all grease and gunk, I use a wire wheel on a drill or grinder to remove any rust and/or old paint.

As for painting I have done both spray bomb and auto. paint from a gun. Just depends on what type of resto. you are doing and what you have access to. If you are going to use spray bomb I would use Plasti-kote. I always use primer first either way.