

This is the cause of my worries--I LOVE this frame--bought her new while in school at East Ridge in Chattanooga. I am now able to build her back up with some new components that she badly needs.
Things she doesn't need:
Wheelset: new one on the way
Headset: CK Patriot
Brakes: SD-7 dime stoppers.
Stem/seatpost: Thomson Elite
What she needs:
Everything else.
I'm willing to drop about $1000 to get her back up to racing status (took a brief hiatus to enter the road and ss world). However, I'm worried about these two spots. As you can see in the photos, there is visible rust at these two openings. 1) Is this fairly normal, 2) is there something I can do to fight this, 3) should I be worried about racing on a 10 year-old steel frame that has never lived outdoors but shows rust?
Otherwise, I might have to buy something new in my price range. Obviously, a new frame would save me more than a few grams, but I think this frame is so beautiful (and rare, now) I'd like to avoid that route.
Many thanks, and sorry for the bad pics.
-Dan