Badly rusted hands
Start with courser nail polishing block or use padded polishing abrasive blocks from a watch or jewelry supply house. Fingernail polishing blocks are CHEAP and very easily found. They also work just as well as any other.
Carefully sand/polish away rust and heavy scratches and pits.
Continue until finish is uniform being careful not to round over edges or flatten areas that are rounded.
Now that the finish is uniform move on to a finer abrasive
make sure to always change direction so as to not leave lines
Be sure to clean up all sides
Continue to go to finer and finer grits
When a uniform and fine finish is achieved move on to a polish cloth or polishing powder on a piece of leather or soft wood block (not pith-wood)
Polish until finish is gloss mirror
When finished polishing place hands on tack and clean them with one dip or acetone to remove finger prints and oil.
Now place them in a bluing pan over a sufficient heat source
Use a media that will insulate rather than transfer the heat rapidly, this gives a more uniform finish and glows time to observe changes in color more slowly. Practice on old mainsprings or junk hands until you get the combo right. Many people use brass or iron filings. I do not, I use super fine pumice powder.
Watch the color change
Yellow Straw, then brownish
Now be very observant, the color will quickly go to purple
Then to blue
then to a deep blue
When desired color is reached remove them from the tin and wave them in the air quickly to stop the bluing.
Blued hands
now I oil them and then clean them with an old polish cloth
Oiling them protects them and locks in the color, make sure all oil is wiped away and the hands are clean.
Now you have a nice set of hands.
Most pocket watch hands have a polished boss, this can be done after bluing on a polish block with polishing powder or you can use a tiny piece of polish cloth on the end of a splintered peg wood.
These hands were VERY badly damaged, normally I would just replace them on a watch such as this but that would not be as much fun. :)