I've been reading on several lists about some not so happy experiences with rusting fabrics, get my book read it and you will be much happier with the results!!! From what I"ve been reading, on various blogs, is the fabric is not staying wet enough long enough for the rust particles to transfer in large amounts. The end result is the fabric has very little to no markings on it, note: cover the fabric and rusty objects in plastic wrap, after soaking with vinegar, to ensure a humid enough environment for the fabric and rusted objects.
Yes you can overdye the rusted objects, I do this all of the time with natural dyes and using my composting techniques, I'll search my files for a some good examples and post them later. If you are using acid or MX dyes don't expect much in the way of color shifts, natural dyes are more prone to shifting colors when in the presence of iron.
You can also using paint, Shiva's, inks, and more over the rusted areas, rusting is just one of many steps towards complex cloth.
How do you know if you went too far??? Well when holes develope in your fabric, you can work this to your advantage though, use the piece for layering.
Oh and don't forget to neutralize your fabric in a baking soda and water solution, this stops the rusting process, albeit only for a little while. This procedure depends on how humid it is in your area.