Past experience and logic would dictate I tell you to throw it back but I'm going to go against conventional wisdom and tell you to go for it but do it as low buck as possible and just make it functional. Why not? It's all there. Some white vinegar, WD-40 and #0000 steel wool will clean up most of the rust. Once the rust on the frame is removed or at least neutralized get some Rustoleum clear enamel and give it a couple of coats to protect the frame from further corrosion. You'll be amazed how much better even the old paint and decals will look with the clearcoat. In fact I'd give everything else the clearcoat treatment too once it's cleaned up. Watch the classifieds and curb for parts bikes or check out bike co-ops if there are any close by for things like tubes and tires. I'm always amazed at what bikes and bike stuff people throw out to the curb.

Yeah, go for it! It will be a great learning experience. I was given one nearly as bad I was going to junk but now I'm having second thoughts....... I may do what I just suggested to this one just because I can.