The derailleur cable might also be rusted. You might want to consider removing the cable from the derailleur and the housing to clean and relube it. There are various bike lubes. Ask the folks at a local bike shop. If you're unsure of how to remove and reinstall the cable (you will also need to readjust the tension afterwards), you might want to take the bike into a bike shop and have them do it for you. Ask them to show you how to do it in the future while you're at it. Actually, if you're not sure of what other problems there might be with the bike, it's probably not a bad idea to have the shop do a "tune-up" on the entire bike to get it back into riding condition. If you prefer to do the work yourself, check out the
Park Tool website on rear derailleur adjustments.
BTW, the title of this thread reminds me of a VW radio ad that's been playing around here...
Originally Posted by Volkswagen car commercial
Actually this car has three speeds... and the third speed is disappointment.