She probably used it on the springs because it was already falling apart and she had nothing to loose.
Try and salvadge it by soaking in tub in oxyclean and a mild detergent. It may take several soakings to get the rust out.
I agree about Christmas stockings, cookie cutter ornaments, sachet holders, pincushions, etc. It's ok to cut it up. Quilt police won't come and arrest you.