Chain slap: Based on what's above, it sounds like a sluggish freehub is the culprit. I'd clean and relube it. It's not difficult if you've serviced cup-and-cone bearings before. A chain that's too long can also make chain slap excessive combined with a weak RD spring. I know you didn't install the chain, but if you ever take it off check it with the big/big +1 method: http://sheldonbrown.com/derailer-adjustment.html#chain

Frame rust: a small spot I wouldn't worry about. It's just a surface ding, they don't usually get worse over time. I have frames that are 30-40 years old and covered in rust that are completely fine. Except cosmetically of course...