Rust in gas flame area of water heater, should be replaced?
I've never seen a burner assembly area that wasn't rusty, H2O is a byproduct of combustion. Things to consider: is the exhaust vent in good condition, is the TPR valve not leaking and in working order? Provided it's not in a location where a catastrophic leak would cause damage, ride it out. That being said, 12 years is getting towards the end of its life. If, at some point in the next few years, a few days without hot water is unacceptable, replace it soon or begin saving money now by upgrading to a tank-less.