I think the AMF road master is a great place to start for learning how, if you mess up its no great loss it was a free dumpster bike of no great value, lots of great advice above a couple items I will second:

-take lots of pictures of how things connect before you disassemble it will save your butt
- be willing to walk away when frustrated, took me a long time to learn this, the cool thing about this is that 9 times out of 10 the thing that I was struggling with becomes crystal clear on how to fix when I come back after the red mist has dissipated
-beer can be a patience enhancer
-take your time

For rust you can do a couple things, brass wire brush or brass wool (in the steel wool section at the hardware store) - good on components, on the frame I use Naval jelly but FOLLOW THE INSTRUCTIONS its toxic and nasty but it does the job. YMMV. Your AMF is a great place to learn skills/ make mistakes and also can tell you something about bike fit -ride it to find if its too small or too big etc and then you will have better data when you want to find something nicer.

What you will find is that it takes the same time, energy, tools and consumables to fix a nice bike as it does something entry level so learn on the AMF and then cast your eyes to something more mid range with nicer tubing and components etc there are lots of them out there and with a bit of patience you can find one for a song.

Have fun.