Joined: Jan 2010
Posts: 9,813
Likes: 1,790
From: Northern California
Bikes: Cheltenham-Pedersen racer, Boulder F/S Paris-Roubaix, Varsity racer, '52 Christophe, '62 Continental, '92 Merckx, '75 Limongi, '76 Presto, '72 Gitane SC, '71 Schwinn SS, etc.
Since I have bags of new Grade25 ball bearings on hand, I would pry out that retaining ring and replace those rusted balls, then use grease to hold them in.
Hoping your spindle and cups weren't the first parts to rust, but it sure looks like something did rust there, so might need some attention for longer-term usage imo.