I think if rust is converted by electrolysis to something else, it's still something that has to be removed, rather than good steel.
I'd consider a good cleaning, maybe ultrasonically. Then, work on the surface prep, with the possibility of stopping after getting an idea of what's going on and having deeper damage welded.
Maybe, then if the project is worth continuing with, the welder might have already annealed the part(s) or the engraver can decide if it needs annealing before picking up the engraving. I think engravers regularly work with harder and tougher metal surfaces, but if the annealing is for the engraver, I'd consider letting them specify that step.
