Looking through the two recovered sections - with copious rust nodules. These nodules are frangible but skinned with a hard crust. I expect that they do NOT shed rust into the water stream.
NOTE that these pipes (some 3000 of them) each 12' (4 metres) long are still an intrinsic part of Oamaru's water supply today. At 130 years old, they are so well laid and joined that and despite the rust build up, the engineers who removed the sections I have tell me they are "good to go" for another 150 years.