If you're getting color off the car and on the rag, that means there's no clear coat. Most of the Pagodas that were not a metallic color had no clear coat. You can use any of the good brand name paint cleaners & polishers to remove some of the bad (oxidized) paint. Do it by hand, a power tool (random orbital polisher) could take too much paint off.
Going to a auto paint supply place (or an actual painter/restorer) is a great suggestion.
Rodd
Powell, Ohio, USA
1966 230SL, Euro, Auto, Leather, both tops
1994 E420