$500! Nice. That's a great place to start. Room for a lot of 'fixing' before it gets tough to justify. From your pics it doesn't look like it will take much to have a good solid truck. What do you have in mind to arrest the rust and prevent more? Use something like POR-15?
The missus drove a Celica and similar vehicles for years, before getting into a new '99 Tahoe. Been hooked ever since, can't stand riding in low vehicles where she can't see ahead in traffic. Drove it hard, commuting across L.A., got a good trade-in value moved into a '05 Z71. And now I've picked up that '02 Z71 Sub. The '99 had the 5.7 IIRC, and the current two have the 5.3L with a combined mileage of nearly 270k mi and not a single problem with 'weeping' water pumps. Don't know where that lore comes from.
More likely any coolant smell problem would come from the plastic couplings on the heater hoses, high on the firewall, where that plastic basks in the high heat. That reminds me I want to lay in a set of that hardware against future need. Especially now we have two such vehicles with near identical guts.
I did do a water pump replacement on hers at ~135k on what turned out to be a specious upsell by her dealer service dept. We were chasing a whirring noise that turned out to be her alternator shaft bearing (which I tore down and re-lubed, still fine). Dealer wanted $850 for alternator replacement. Similar price for water pump. I did the water pump for under $250, incl coolant, thermostat and upper and lower hose replacement and S-belt. She had taken her vehicle to the dealer during her warranty periods and wasn't much of a fan of my keeping a really old pickup as my daily driver. Somehow its mechanical foibles got turned into a negative view on my mechnical ability instead of the opposite. But once she got the sticker shock of those two suggested repairs and I showed her how much more inexpensively I could do the work, she got enthusiastic about my doing the work. Anyway, no cooling system problems before or since. I'm aiming to do the same preventative work on my Sub in the near future. Most of my mileage is in the desert southwest, freshening up the cooling system / making it a known baseline before taking it out there is important. Considering a preventative fuel pump replacement too. My Sub was a family / mom taxi in its previous life. That's where fuel pump problems seem to originate with these vehicles. Mom scuds about town on a 1/4 tank or less all the time and cooks the pump. And beats the **** out of the brakes and alignment. I found problems with both the latter when I first looked at mine,
And I got to say I don't know how you folks in the rust belt can put up with it. My '02 spent it's life in Orange County CA and last month when I dug into the rear cargo area and wheel tubs etc it was basically as good as the day it came off the assembly line.