Repairing / refurbishing cedar swing set
It's basically a matter of... 


Replacing all compromised components with new wood or composite ones
Establishing a base that dries out quickly after the rain, so that the wood can also dry


I'd replace the wood with pressure treated or cedar parts. I'd also put the set on blocks, as you've done, and fill in around the blocks with sand, wood chips, or rubber playground material. 

You can paint or seal something like this, but you can't really protect all the mated surfaces and fastener holes. This is where the rot occurs most aggressively. Repair it and be happy until it needs more repairs. Repeat.