Pitted Cups - Can I get away with this level of pitting?
My life has been such, living in this corner of the world, where it simply hasn't been an option to buy new.  And growing up here in a world before internet, if Lakeside Cyclery or Sears didn't have it, you weren't getting it anytime soon no matter the cash-flow. So...

One can often at least ease the pitting with the use of fine steel wool, fine grade sand paper, or a rotary tool spinning a ball-shaped grinding stone or felt cloth wheel &amp; polishing compound.  It's always best to be conservative so I'd start with the steel wool first, and if I feel the benefit would out weigh the risk of damage that wrecks the piece, I move up the list I've put forth. I'll add here for general knowledge sake that regarding grinding or sanding a finish onto a work piece, the technique i advise is reversed.  One would typically start with more aggressive measures and work down to the finest finishing techniques. In fact that's what we'll end-up doing here---i finish a deal like this with #0000 steel wool.

I've had decent results getting pitted cone nuts and wheel cups into shape.  I define decent results here as grinding and rough feeling hubs spinning smoothly and quietly.  Reports from others whose bikes I've worked on reporting, "that wheel's still running great!" months after repair and repacking.  The times I've had occassion on my stuff to do this repair, ride for a few hundred miles and then dissect the hub, there hasn't been any real hints that it was doing more damage (wheel spun smooth, no appearance of unusual wear, the bearing balls came out looking quite the same as going in).  Anyway, this is obviously not as ideal as replacement, but I'm confident your cup will do fine for some time after this.  Quite frankly, cleaning and repacking a hub or bottom bracket with good clean grease (and new bearing balls if at all possible--there a dime a piece or less) is probably the chief reason for these successful out comes.

Here's a few tips:  Take locking pliers (ie: hemostats) or a needle-nose pliers and from a pad of steel wool (#0000--very fine), rip or cut a 2.5 cm wide strip. Fold and roll this strip to a general shape of a cylinder. Grasp with the pliers the ends of the cylinder causing it to bulge into a hard, round tip. Continue to hold this shape while working it aroun the inside of the cup. I go all around the cup, working the pitted area a little more.  Same technique if sandpaper required. No lower than 220 grit.  Care should be used to not involve tip of pliers into the cup. Also, prior to repacking CLEAN! out the cup or hub of all grit or steel wool fibers. 
If you use the rotary tool, practice before hand and just barely touch the cup. I only do the pitted areas with this and then finish whole piece with fine paper then wool.
For cone nuts I'll have a thick piece of steel wool over an axle spacer, and with the race of the cone nut, I pinch the wool into the spacer hole and turn.
There've been times that I've paused in this endeavor only to find the pits were growing larger and more appeared where the already stressed metal had flaked away under the addition abrasion applied.  If you note this i would stop and just proceed with repacking and new bearings.  There's not a great deal of thickness to a cup (as compared to a cone nut)which makes it much tougher and riskier to hand-machine a cup's race smooth again.
Get er done.