I see that it's been a few years since this thread was active but thought I'd post here instead of making yet another thread on restoring headlights. Mine were getting very cloudy a couple of years ago so I decided to see if I could find a "cheap fix" and found a video of someone that uses a combination of toothpaste and baking soda. I tried it and scratched the hell out of my headlights, so I wound up buying a headlight lens restorer kit from Turtle Wax. It cleaned up the scratches enough so I was happy with the results, but within a year the cloudiness returned. Last week I was on the Sylvania website looking at SilverStar headlights when I noticed they had a Headlight Restoration Kit. I noticed that they said it was rated #1 by Popular Mechanics, so I did some research and found that the kit was highly recommended by the majority of reviews on Amazon.
http://www.amazon.com/Sylvania-Headlight-Restoration-Kit-Pack/product-reviews/B00429NKWK/ref=dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1 The kit comes with three grades of sandpaper (700, 1000, and 2000 grit), a bottle of "surface activator", a packet of rubbing compound, and what sets them apart from other kits, a bottle of UV blocking clearcoat. They say you can do it in about 30 minutes, but I'd say if you do a thorough job give it 3-4 hours. I was amazed with my results, and at 20 bucks is a good deal.
http://www.youtube.com/watch?v=QvdiiXfvkD8