Sounds pretty rough . If you can pull carpet and seats to show the floor is in good condition and sills are too etc take pics for future reference. As has been said. There is no reason for a wof inspector to order old underseal to be removed. If there is obviously poor repairs and corrosion that's a different story but it sounds like it's just goopy old underseal.
I'd be finding a new wof station
He's probably looking at the scruffy paint and just finding a reason to not put a wof on it
Also surface rust isn't a fail. He's just finding more reasons to turn you away