I would do the minimum amount of work I could to see if I could get the engine running properly, starting with checking your codes.
If you could not do that cheaply (couple hundred bucks) I would sell it and start over. If you can get it running reliably, I would then go with whatever method works best for dealing with the rust (best to me means quickest, most thorough = sand blast + POR15).
Regarding the chlorine and other pool chemicals, I wonder if there is any value in seeing if they need to be "neutralized" kind of in the way you use baking soda to neutralize battery acid. Or if a good blasting, cleaning, rust treatment will have the same affect? I'm just thinking out loud here, have no idea if the pool chemicals are a factor after all this time, or would be a factor after the rust/corrosion is removed, just something to consider.
For the exhaust, I would just replace the bad parts with stock, or just replace the whole thing once you get it running properly. If you don't want to replace the whole thing, I'd have a local muffler shop see if they can just bypass the cut up parts with new pipe and call it good.
Good luck with that thing, for $1100 bucks if you can get it running well and take care of the rust, it could be a decent deal. -Eddie