Dick is right, and just about as good with advice as you can get!

As cutdowns go, it's not bad looking... someone tried to make it "LOOK" like a carbine.  It should be a nice shooter as it, but to restore it to a full length rifle would require a new barrel, repairs to the stock, and you would need to acquire the upper band, and some other bits and pieces.  A lot of money involved there.  If you don't intend to sell this one, keep it as is and look for another that is original.

As for the condition of the barrel... is it rust, or just crud that needs to be cleaned out?  Have a good gunsmith check it out for safety's sake.  Deep pitting may make it undesirable for shooting... but surface rust can be removed with a bore brush, some Hoppes solvent, and a little elbow grease.  Sometimes, even less-than-perfect Krag barrels can be great shooters!