The picture is of the steerer tube (what you have marked as Frame), this can have surface corrosion, which isn't an issue, and wouldn't want to prime it as it is a clamping area.

From your description you are having issues with the (a)headset installation, unless you have the manufacture / model number, and can download the installation diagram, or follow this http://www.parktool.com/blog/repair-...eadset-service, would still suggest that you need to take it to a bike shop,