The first step is to completely flush it with fresh water to remove any lingering salt. You can't do this too much. After that there are any number of oil/wax protectants available, from the Weigle frame saver, to automotive and industrial products you can find at auto or hardware stores. There's no need to remove the powdery rust, the oils will seal over and around it.
Years ago, we used to seal our frames with linseed oil, but today's aerosol sprays do an excellent job and are easier to apply.
As for the freewheel, I wouldn't be surprised if a fresh water soak, a bit of hand labor to work it loose, followed by an alcohol rinse (removes water), then oil, brings it back to 99% of the way it was before.
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