The rust is from water standing in the housing, displacing the the lube at the bottom. I don't think there's enough damage to warrant a rebuild, but there might be a low-pitched hum created by the rust pits as the gears mesh. Nothing drastic, but possibly annoying.
I'd suggest going at the rust with a steel scrub brush and some Diesel fuel, WD-40, or other lightweight oil, followed by a good flush with a pressure washer or a trip to the coin car wash. Rear ends are incredibly rugged, so don't worry about doing any damage with a cleanup. The blemishes on the carrier housing are just casting flaws that were not completely machinde away when the carrier was manufactured. No sweat there. Does the gear ratio suit your purposes?
Jerry
