What do you need rust for? If you need it in any sizable quantity, you may want to buy some, as that process won't produce rust very quickly. It's sold in home depot, I believe, as a concrete colorant. Also, you can probably use magnetite (Fe3O4 instead of Fe2O3) which can be found in large quantities at most beaches by using a magnet (take a guess at the meaning of the name). As for your reaction, the rust would form on the nail, but flake off.