Not sure about the rust, I've always pulled it apart sanded it down and repainted.
Regarding the freeze plug, I've replace one on a ford 5.0 that popped out. I strongly suggest putting the new plug in the freezer before trying to insert it, and if you really need to you can take a torch or heat gun and carefully heat the hole. Also ensure you evenly tap the plug evenly to avoid damaging or unevenly installing the new plug.
If you need to removing the plug, I found this site within seconds of searching which would enlighten you on the entire procedure.
http://m.voices.yahoo.com/how-replace-f ... 06420.html