Other than tearing the engine apart and bead blasting, you're not going to get showroom quality. However, since most of us actually ride our bikes, I'm assuming that's not what you're after.
That being said, let me tell you how I got my VT700C looking a LOT better than it was.
Like you, someone had painted over the factory coating, with what looked like some cheap dollar store gloss black. Needless to say, what with the peeling and discoloration, it looked like crap.
Here's what you'll need:
Wire brushes of various sizes
Baggies, zip ties and trash bags
Dremel (not necessary but VERY handy)
600 grit sandpaper
Scotchbrite pads (synthetic steel wool)
Dupli-Color Hi-Temp Engine Enamel
*I did this on a couple of bikes, on one I rode it to a coin-op car wash and used the degreaser there initially then touched up with aerosol degreaser, on the other I used the aerosol and Dawn soap, scrub brushes and a garden hose. Both turned out fine.
On a COLD bike:
Start by masking off everything you can that's not the engine with the tape and trash bags. Baggies help with small stuff, or stuff that's easy to remove that doesn't need painting. Thoroughly saturate the engine with degreaser, making sure to get into nooks and crannies, and don't forget to pull the plug wires and clean under there. Accumulated crud will need additional scrubbing and soaking. Try to avoid getting degreaser on electrical components or the carbs, these items should be wrapped tight. Let soak 15-20 minutes.
Lather, rinse, repeat until the engine is relatively clean.
If there is old paint, this is the hard part. After the engine is dry, start scrubbing with the wire brushes. Dollar stores are great sources, look in the kitchen and tool sections for various sizes and shapes. You don't have to remove all of the old paint, just any that's flaking or loose. This will also allow you to find any grease and crud deposits you missed (and you will miss a few). The paint that is not loose needs a good scuffing. This is where the Scotchbrite and sandpaper comes in.
After you've got the old paint and/or surfaces scuffed and cleaned, go over the engine once more with a scrub brush and some soapy water. Dawn works well. Rinse and let dry. You want it completely dry, so you may want to grab a hair dryer and make sure the nooks and crannies are dry and clean.
Dupli-Color makes two types of hi-temp paint, regular (for engines and such) and super hi-temp (with ceramic!) for manifolds, etc. Either will do. The ones I prefer are Natural Aluminum or Brushed Aluminum. You can also mix and match for a more detailed look. If you want a black-out look, I recommend semi-gloss black.
Using the newspaper and masking tape, carefully mask off EVERYTHING that you do not want painted. This includes rubber hoses, sheetmetal, frame, exhaust, etc. Remove the plug wires (did you remember to scrub under the plug caps?) and tape them out of the way. You want to cover anything that could catch overspray. Cables should be zip-tied out of the way. Once you've covered everything but the engine, you're ready to go.
LIGHT coats are the key here. Don't try to cover everything at once. I normally go for 5 light coats, with about 20 minutes between coats. Make sure to get under the exhaust pipes, inside the fins, every nook and cranny. If you get a run, wipe it off quickly and you should be fine after the next coat or so. This is pretty forgiving paint.
Let dry for an hour or two, then unwrap the bike and put everything back to normal.
If you decided to go for the blackout look, or if you want a little more detail, you can sand the cylinder fins lightly with the 600 grit until the bare metal shows through. I like starting with the 600 and going finer until I hit 1500 or 2000 grit, but it's up to you. If you want even more detail, pick up a stainless bolt kit off of Ebay. Really stands out on a blackout, still looks nice on a silver engine.
Now would be a good time to hit the rubber sections of the clutch line and other small rubber pieces with your preferred treatment.
This method works great for me, pretty cheap (around $6 a can for paint, I normally use 2 cans, everything else is dollar store or cheap hardware stuff) and easily done over a weekend. The results last several years. DO NOT skimp and buy cheap paint or you'll end up back where you started. You can buy cheap degreaser if you're really broke, but don't cheap out on the paint.
BTW, the bike will smell a bit for the first couple hundred miles, this is just the paint going through it's "final cure" stage and will clear up soon. A little haze or "smoke" off of the engine is normal. The heat hardens the paint and actually makes it much more durable.
This is a relatively easy but time-consuming job that anyone can do, and the results are definitely worth it. I've done this on several daily riders, both blackout and aluminum, and in most cases it looks like a factory job. The trick is all in the prep work, getting the engine as clean and ready for quality paint as possible. For best results you may want to remove the exhaust, but it's up to you. Experiment with the paint prior to painting the engine to find out what the final color will be, mix and match and just get creative.