SB, I would sure argue with the insurance company if they don't want to replace electrical tools that have been under water, and you have insurance.
As far as your table saw, I don't think that you can do an adequate job, considering the amount of rust that's probably there, by hand. Disassemble the saw and treat the "non-working areas" if the grinder you choose says it's appropriate. If you "pollute" his grinding fluid, it will cost whole bunches more and a lot of the "underneath" rust will be removed during the grinding operation anyway. Since surface grinders fight rust all the time, they are excellent info sources on this. Loctite, Crown, CRC and many others produce excellent industrial grade products for applications like this.
Wick's comments would be right on for typical rust problems by you would probably have to do so much sanding that you would get the saw out of true anyway and this makes kickback problems more likely. Your life, teeth and love life are terrible things to waste. A FLAT table helps prevent this.