The rust is going to be harmless, except to the extent that the grill will eventually corrode all the way through and the coals fall on the surface underneath.
It's not possible for anyone on SA to tell if the paint will be harmful; you would have to get it tested. Once you fill that tray full of hot coals, some of the remaining paint will almost certainly burn away, and whether or not that results in harmful smoke really depends on what it's made from, and how much actually burns.
FWIW, that looks too shallow to make a good charcoal grill, regardless, and it's likely that the steel is thinner than you'd want as well -- likely to warp or even crack. You'd probably be better off finding a secondhand charcoal grill.