yikes. A lot of opinions. cycocommute's note is cogent and (at least for this PhD Chemical Engineer) correct. As far as proscriptions and recommendations, Bill Kapaun is spot on. I just stripped my old Schwinn Paramount and the brake and derailleur cables were absolutely fine where they were inside a cable housing. Pretty good outside, too, as I did coat them with grease. (As an aside, I think that they're reusable: they came off a 26 inch frame!).

Regarding stainless rusting. There are many grades of stainless, as is pointed out. The major division is between ferritic (non-hardenable, weakly magnetic, strong, and listed in the 400 series: 409, 410, and others), martensitic (hardenable, weakly magnetic, not as strong, but can be given an edge, also in the 400 series, e.g. 410 and 420, often used in knives), and austenitic ( non-magnetic, and much more resistant to corrosion and rust, labeled as the 300 series, including 302, 304, 304L, 308, 316 and so forth).

Generally, uncontaminated 300 austenitic series won't rust, and won't spontaneously deplete in chromium or nickel. In salt water applications they can fall subject to something called stress chloride corrosion and cracking. (Which is why, btw, you should heat your pasta water first, then add salt to the boiling water and stir so that it dissolves quickly and you don't have salt crystals laying on the bottom of your ss pan as it heats). But no bike that's not a submarine or on board a naval vessel will likely see that. The Bowden cables (which is what our brake and shift cables are called generically: twisted wire with a cast metal end) are often made with 316ss, and this is more resistant to the chloride attack than other 300 series stuff.

Ferritic and martensitic steels rust less than carbon steel, and are more resistant to corrosion. But they will rust. I think most cables that are SS will be 300 series.