My friend has an OS MAX .46 FX that is about 7 months old and he plowed the plane into the dirt but good. because there was dirt in the carb we opened the back to get the dirt out and we see RUST! lots of surface rust! Is this normal? after every flight we both burn off the excess fuel in the system and use after run oil in the engine. Engine runs good but has anyone seen this?

There are only 3 major moving parts in that engine that can develop rust. The front and rear bearings and the crankshaft and its still possible that you have not run the engine completely dry each day since it often takes a number of attempts to run it dry and it still seems to always have some fuel residue left in the crankcase. Adding a good dose of a proper afterun oil followed by a good prop cranking should prohibit the formation of any rust. If you are seeing a brown coating of sorts on the insdide it is likely to be a castor residue which often forms on the back of the rear bearing cage and sometimes on the crankshaft.

Try and scrape off some of what you feel is rust and take a closer look. I think you will find its a somewhat paste like castor residue and nothing to worry about.