I don't think you can pass with holes like that in NH/ME either. My local garage says if they can't run their hand over it, it's not allowed. But sometimes I wonder, daily I see vehicles with big holes, so each shop probably goes by their own rules...
At least with suspension parts one generally has years before the rust compromises strength. It's also an eyesore that is under the car; out of sight, out of mind I guess.
I'm not sure if steel slows down rusting, once it gets a layer; I know aluminum does, the oxide forms a protective layer. But I don't think that is true for steel; it keeps rusting at the same rate. Maybe worse, once the flakes start, since it can trap water for longer against good metal. It may just have the appearance of slowing down.