Rusty frets? That's unusual, since frets are not made from iron. Old frets are usually brass, newer ones are called nickel-silver but they're really a nickel-brass-zinc alloy (no silver in them at all - the name refers to the colour). Some are even a gold alloy or stainless steel. None of these materials should rust, but the copper in brass
is susceptible to oxidation.
In places with high humidity and especially cities with poor air quality, or if you're close to the ocean where you get salt in the breeze, the brass may show a greenish discolouring (called verdigris). A bit of gentle metal polish (a low-abrasion paste is best), carefully applied, can remove this. I've also read people use a product called NEVR-DULL (I've used this on metals with great effect, not on frets).
I suggest you put painter's tape or a similar low-glue tape on each side of the fret when you work, because the polish can discolour the wood. To prevent it from getting into the pores, oil the fretboard first. And remove the strings, of course.
If the discolouration proves stubborn, some luthiers suggest using an extra-fine steel wool (grade 0000) to help remove the material, but I'd recommend you try a plastic pot scrubber first because it won't mar the fret board. I also recommend you make or buy a guide that exposes the fret wire, and covers the fretboard while you work. Like
this one. You can make one out of an old credit card or a piece of an old plastic jug with a fairly flat side.
Oiling the fretboard will help prevent this in future, but not forever.
As for the action - sounds like the humidity in you area is high, and may have bent the neck slightly. If the humidity is always high, you'll have a bigger problem. If its seasonal, the neck may restore itself as the humidity lowers. You can lower the action by sanding down the saddle a tiny bit, but if it's already buzzing, you'll likely increase that effect.