Welcome to Bladeforums KrazyPete.
I'd say that rust is going to require more than just polishing. At the very least some scrubbing with WD40 and 0000 steel wool, or some fine grit sandpaper.
As for the etch, if you polish that portion of the blade you are going to affect the etch, especially if you use a buffer. The etch might not disappear, depending on how much you polish/buff that area, but it will be less visible. The etch doesn't look very deep.
It looks like all the real damage on the etched blade is up along the spine (above the nail groove). I would just tape the blade off from the nail groove down with masking tape or aluminum duct tape, leaving only the area that truly needs work exposed, deal with the rust, and leave the rest of the blade untouched as far as the finish goes.