It doesnt look that bad. I echo the recommendation of sanding (320 on a random orbit would be my choice).
I wouldnt put that red glaze directly on the bare metal. I have had some problems with it not sticking (now this was a long time ago, and I wont say I prepped it properly, so others may have better experience).
Sometimes I have treated the rust (Eastwood sells some - Metalprep I think is what I used last). Other times I have just sanded and primed.
If its not deep pits you can block it out with just primer. The epoxy first coat followed by a sandable primer works well. No wet sanding until final coat.
I dont have any hard data that shows that when I just sanded it came through vs if a metal prep was used. They all worked for me.
Do block sand it though, it will come out straight and smooth...
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