Sad to hear this Dan but with 12months rego and at worst you'll still get $500 back in 12months time, you've got plenty of time to enjoy it and evaluate the situation. Water in the cabin isn't uncommon but you'll have to go round and examine just how extensive the rust is. Is it just surface rust or are your feet going to push through the floor, that sort of thing. Also check around the wheel wells and into the sills below the doors, see if the rust is terminal and if you can push a screwdriver handle through the metal.
Windscreen seal and door seals are major culprits to letting water in and ruining the floor carpets not to mention the ensuing rust, there's also another hidden area posted here
http://forum.w116.org/interiors-and-exteriors/a-source-for-cabin-leaks/If you've got a sunroof, that may provide a source as well. If the rust isn't too bad and is as you say, surface rust, I'd go about replacing seals and treating and painting the rust myself. If it needed extensive welding, then I'd be considering doing that drive around for 12months option. If you didn't pay too much for it, all the better.
The rear suspension - Have you got Self Levelling Rear suspension. If you're experiencing a bouncy ride and no dampening it's most likely the spheres (accumulators, pressure cells they have a few names) need replacing. Look here -
http://forum.w116.org/mechanicals/new-hydrospeichers-and-pendelstutze/Feel free to post pics, we love pics

but it might help to evaluate how bad the rust is and point out any further trouble spots.