It appears to be entirely rust. It looks very similar to the exterior surface of the backspacer in the "before" pictures.
I'm hesitant to try electrolysis or any other kind of electrochemical removal in this case. I'm not knowledgeable enough (and probably not willing) to attempt a complete disassembly and reassembly of the knife. This presents a problem for any kind of dip process:
One, I'm not certain how that might affect the bone scales (or their stain). I think the shield is also held in place by some kind of adhesive, but I'm not certain.
Secondly, the knife is constructed from several different adjacent metals. The backspacers and blade tangs are both stainless steel, the liners appear to be brass, the bolsters and bolster pins are nickel. The worst case is at the ends of the knife where I've got a nickel, brass, steel, brass, steel, brass, nickel sandwich with the steel pivot pins running through the whole mess. I'm not sure I can predict how that's all going to interact, but I'm concerned about
galvanic corrosion. I'm also a little wary about how it might affect the etching on the main blade, but that could probably be kept out of the solution.
The problem I have is that the brass center divider (does this part have a technical name?) splits the interior compartment up into two sides that are both a bit narrower than a q-tip. But even using q-tips would be...extremely tedious. The thing about Blue Magic (and most metal polishes, I would think) is that you have to keep rotating to a fresh section of cloth if you want to make any progress.
I ran across an intriguing old knife/gun cleaning trick that might work. Supposedly you can remove surface rust by applying a little oil and then rubbing it with a graphite pencil. This is heavier rusting than the trick is intended for, but from my experience with the other side of the backspacer I can say that it
is just surface rust. Minimal, if any, pitting. It's worth a try, I guess.