Help! Ovalised seat tube!

So it turns out the uber-cheap Sparton frame I picked up at HH on Sunday has an ovalised seat tube... Bollocks... :(
It's a 26.0 tube, Cro-Moly and the pinch/bulge is about 0.2mm...
Ross at Brixton Cycles had a look and suggested a coupla solutions:

1. Use an expanding collet to force the tube round again
   
2. Ream the tube out if there's enough steel there (I'm going over to Ross's place tomorrow to measure how thick the tubing is)
   Wanna avoid heating the tube to save the paint cuz I'm not gonna throw any more money at it, it's supposed to be a cheapy to keep me sated 'til I can afford the stealth Panasonic...
   Anyone out there got any other bright ideas? Or am I throwing good money after bad? Wanna get this sorted ASAP...
   Cheers peoples, Joe