Ed,
You have a collectable Luger in any case. You need to follow the advice previously rendered about removing the surface rust-you may wish to consider a couple of days soaking in Kroil-and then gently working the remaining scale with the 0000 steel wool.
Likewise, you may wish to consider a restoration. To do the work necessary to bring this one back to "as issued" appearance, will likely cost above a grand, but you will have something that looks nice and should be easily sellable at a nice profit should you decide to do so.
Tom A.
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