Yes rust can and will weaken a steel frame, but there's a fair degree of forgiveness. The key is the depth of the rust, so if you're seriously considering this frame you need to check it out in person. Use the auto mechanics trick of bringing an ice pick to scratch at the rust to find bottom, and/or pushing it through, which is only possible if the rust is nearly through.

One thing to consider on this bike is that the fork doesn't seem to be original to the frame. (not sure, but in that era most forks were painted to match, and replacement forks were full chrome). A replacement fork usually means a crash, so check carefully under the front ends of the down and top tubes cor any sign of buckling, and on top for stress cracks in the paint from stretching.

If your friend is knowledgeable, and advising you already, bring him along (you pick up lunch, or a few beers when you get home) to examine the bike and advise how much more it might need to be brought up to snuff.