Yes, it is corroded, probably from being stored outdoors, or in a very damp basement. And, Yes it might crack one day, but that could be years away.
In any case, it isn't dangerous because a seat tube failure there isn't likely to cause a crash. It's most likely to crack when climbing a steep hill with lots of pedal pressure, in other words at very low speed. I'd have no problem riding this as an around town bike, or on longer rides if I had access to alternate transport in the event it cracked.
Having cracked a frame in a similar place 100 miles from home and having to do a field repair (which lasted 2 more years) I can assure you that the worst that will come of riding this is inconvenience.
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FB
Chain-L site
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WARNING, I'm from New York. Thin skinned people should maintain safe distance.