yes coolant is a corrosion inhibitor, because engine is made of different metals water acts like an electrolyte to create corrosion, coolant is inert and prevents this

clean out the rust i heard some mechanic put soap powder inside and rinse but i wouldn't do that, just flush until you get clean running water from the drain and then fill with coolant

the coolant will stop further rust, if you are talking about cleaning until bare metal then you need to strip the engine and polish one by one the cooling channels