Cherie, don't have to be so old to know what those are
. We had 2 functional ones until just recently LOL.
As for using rusted bits, it greatly depends on the bit. Sweet iron is supposed to rust and horses do seem to like the taste better. I don't try to clean the rust off, I just check them over frequently to make sure that there aren't any sharp spots that might hurt a horse.
HOWEVER, there are other bits, specifically those plated type bits (usually chrome plated ones are the worst) where the plating will start to crack and they will start rusting there. As they rust, the plating will start to chip away and leave some really nasty sharp edges that can tear a horse up horribly. But, those are those really crappy cheap bits that aren't worth having anyway.