aha!
good to see another proponent of the use of water to derust frozen parts
nature's almost perfect solvent, is especially good on rust sieze cast iron parts,
the only thing better at getting into the innards of the part is a mix of water and antifreeze, but
antifreeze mix does not dissolve rust very well at all, which got me to thinking
what does antifreeze do to water to make it seep in where water won't?
it reduces surface tension
so add a few drops of dishwashing detergent, it too will reduce the surface tension and allow
the water to seep inside much better than plain water, and still be a good rust solvent.
its worth the effort, but first get the outer end of the shafts mushroom removed
another thing which will make removal of the set screw should you be forced to drill it
take an angle grinder and polish up a flat on the cast iron pulley about the size of a nickel or dime
slowly heat the pulley and watch for the colors to run in the shiney spot, it will first turn kind of light yellow, full straw
dark straw, light blue, dark blue and then full on purple, stop there and let it cool normally
this heating will anneal the set screw so that it can be drilled out if you must to remove it.
don't try to heat the screw by itself, which is hard enough to do down in a hole, but it is real easy to
get it red hot and then the cold cast will chill the red hot screw, making it harder than hell.
just take it slow, maybe 5 minute with a decent torch watching the colors come up, the goal is full dark purple
on the shiny spot that you ground off, (you don't apply torch heat to the shiny spot, it is just your indicator as to how
hot you are, roughly) it will be in the 650 degree F range to anneal the set screw.
too bad you don't live closer, i have a 30 ton three leg puller i haven't had a use for in nearly 25 years out in my old rollaway.
believe me, that pulley would come right off in no time with very little prep work.
pulling sprockets and pulleys off with a 100 ton portapower and a huge rose bud for heat, makes your job a walk in the park.
no way i would cut up either the shaft or the pulley, no reason why both cannot be saved to work another day (or half century)
good luck
bob g