Timing is changed without removing the flywheel.. on the contact breaker assembly there is a notch for a flat screwdriver next to a phillips screw. The phillips screw loosens the contact breaker assembly, and the slot adjusts the gap and timing.
As for a rusty fuel tank, I would advise that you Kreme it. I've heard super things about that product.
No matter WHAT you do, you NEED a service manual from clymer's for this bike. A bike that old that has sat for that long will need a bit of work, none of it is hard with the manual. trust me on this one, I just breathed life into a dt250, myself.