I'd guess the bike is clear-coated, and the corrosion is a result of damage to it. In which case, making it pretty again won't be simple... not sure what else to add.
BTW: I had a CFR1, which is pretty much the same as this, and it had a 135mm OLD. If yours is the same, you can stop squeezing the stays and have a stronger wheel with less dish if you add a 5mm spacer under the left locknut (you may be able to get away with using the 130mm spindle by moving it 2.5mm to the left).