Yes you’re completely right about not water proofing the bunks, at the time we were trying to get the trailer done as fast as possible so that we could get the boat back on to the trailer, if we could go back we would have used marine grade wood, instead we just used some wood that we had around the house
I’m sure that a wire wheel grinder would work, you may also want to try using a flapper wheel first to get a majority of the rust off first of its severe