".... Flathead runs but tuneup needs tweeking by a flathead guru. It has a rebuilt carb, new points condenser plugs and wires....."

Like Bob this would be a big red flag for me. These engnes are nothing to tune properly and if they can't get it running right chances are there are internal problems.

The rust would bother me, (but hey that's one of the reasons I live in AZ).

Personally I would run a compression check on the engine and personally check over the frame before I spent any money on it.