Hard to tell just how bad it is, but how much of a concern would this be? The plan is to remove the lower race, sand bare, prime, and paint.
It doesn't look serious; you have a lot of steel in that area. As long as there is no sign of serious corrosion on the inner tube, I think your plan to strip, prime and paint is perfect.
Life is an illusion...
It doesn't look bad to me. Provided there are no surprises when you get the cups out, as long as you get all the loose rust off and treat the area with a rust reformer before painting, it should be fine for a few more decades.