That boiler is in fine shape, mine when I brought it home makes yours look like it's on the showroom floor at Axeman Andersen.
For the rust under the rubber gasket for the hot water coil mounting plate, just grind it as smooth as possible around the studs, and apply a very thin layer of Permatex Ultra Black RTV on the steel boiler surface, on the rubber gasket on both sides and a thin layer on the coil mounting plate. The important word here is THIN.. you just want to 'paint' the surface with the RTV sealant. then instal the gasket and coil. do not over tighten Just apply enough torque to see the gasket start to compress and you can see the gasket bulge a LITTLE, around the edge.
This is the procedure I used 5+ years ago on my VERY rusty AA 260, and I don't have any hint of leaks.
The inside of the boiler looks very good, Don't be concerned about the shallow groove worn in the gasket lip where the fan throws the fly ash, my gasket lip was worn at least twice as much as yours.
Lube up the grate rollers, replace if they have flat spots, replace the brass bushing on the ashing crank shaft and just clean her up..
Make sure you complelty seal the outside upper ring of the ash funnel to the ash cyclone tube, it must be SEALED to the tube, I used rope gasket and furnace cement. My cyclone tube was worn with a groove from years of fly ash being blown around the funnel..
If you decide to pressure test the boiler fill it with water and apply air over the water to pressurize, or use house water pressure. I doubt very much if it has any issues..
Here is my long ago thread on my AA260 rebuild : Axeman-Anderson Anthratube 260m disection
Good buy, you'll really like the AA!