Help with rust on bottom of walls

Hey everyone! I've got a problem here that I wanted to see if I can get some input on. This will be the third year for our pool. We noticed some "bubbling" of the paint along the bottom and when we investigated further it seems there is a line that is about 2" to 2 1/2" from the bottom track up that is starting to rust. Including the uprights. (The bottom track doesn't seem to be affected.) We were thinking we should brush off all the bubbles and rust and coat with rustoleum paint. Is this the right course of action, or will it even help at this point. Any other suggestions on what we should do? I'll attach a couple of pix. I'm working on getting all the sand out from around the pool as we speak. Hoping to start on the repair work this weekend.

Thanks everyone!
Karen

http://i27.photobucket.com/albums/c1...himinea068.jpg

http://i27.photobucket.com/albums/c1...himinea070.jpg

Last year when I had my liner replaced, we found rust when the old liner was removed. The rust was only visible on the inside of the walls, not the outside. The guy who was doing my installation took a wire brush and knocked the rust off and then sprayed it with rustoleum. (I think that is what it was.) It appears to be OK this year. My pool is 8 years old. Don't really have any advice for you, but just wanted you to know that you aren't the only one who had this problem.

Thanks for the reply WaterMom! Our pool was built up (with crusher run) because of large rocks they dug out. It is on a slope, and we didn't want the gravel washing out so we framed it out and filled it with the rest of the gravel and sand. I really think the problem is the tarp that was put over the gravel is holding water around the edges and keeping it from draining. We plan on taking care of that when we dig it out.

Karen