[Ender]

I doubt you'd want to use the rusted iron. Pitting is evil, and since it sounds like it isn't surface rust, it is pitted.

The other one pics would be helpful. If the seal groove and plate surface can be cleaned to where there is no carbon, no pitting, no wearing of the seal retaining edges, and no out of factory spec deformation (check with super thin feeler gauges and a straightedge), then you should be able to reuse it. I think the exhaust side is a common place for coolant seals to give out, and then the hot gases just shred the metal if it's run much at all after a seal goes. I've seen some pretty wicked erosion.

Try rotaryresurrection.com, he has some tech tips with pics related to your questions there.