Jim.i had this same problem..very deep anerobic stainless corrosion in this very same location..i removed the rudder,cut away the glass and foam about 4 inches down from the corrosion,had it tig welded and repaired,reglassed the removed section,reinstalled with new epoxy lower rudder bearing..lots of work but much cheaper than new rudder...I had to fix it as i sail in all conditions based on my schedule and the thought of that weak point would torment me every time the wind came up..the pitting was quite severe in my case however..

That sounds like the perfect solution Jim..nothing less confidence inspiring than a weak rudder post.

How much of a problem is this rudder corrosion? Since I am currently hauled out should I drop the rudder to check? I have not seen evidence of much corrosion anywhere else where I have dissasembled rigging etc. Are there incidents of actual rudder failures?

Since your boat is older, I would check it   You might be able to see enough by scraping under the nylon washer between rudder and hull. My boat had a small gap, just enough to see some black pitting where it should have been smooth stainless.