It can be fixed up. Just takes a lot of elbow grease. Knock of the initial layer of rust with some steel wool and Flitz. Sometimes I will soak overnight in Kroil first.
I'd start out with some 400 and see where you are at. If it is not abrasive enough, or too slow, go to 220 or 240. I even take a random orbit sander to really bad ones. It speeds it up, but you have to be careful not to take too much off. You dont want to change the countour or erase the tang stamp. Then you have to start at 320, then 400, then scotchbrite, then steel wool, then buff(if you wish). I wouldn't buff that blade. Probably go scotchbrite finish on it.
I have brought worse knives than that back from the dead. You just need to figure out how far you want tp go with it. You can keep it looking old/used(just not rusty), or you can almost make it look like new, or you can go somewhere in between.
Here is an 1979 Taylor Cutlery Elk Horn that was in WAY worse shape than your knife. The blade was completely trashed. Now it is a mirror. Tang stamps still intact, but I had to slightly reshape the blade.....
