Took apart my thermostat housing, thermostat and rear connecting pipe behind the block and found a lot of rust inside. I also took a peak inside the water pump while the pipe was off and could see a lot of rust/corrosion build up on and around the impellers.
Is this a sign of previous owner using the wrong type of coolant or maybe just used tap water?
Is there any special chemical or additive I can use to get rid of all the rust in the block?
Drain , fill with distilled water and burp the air.
Go for a drive , come back drop fluid again and fill with proper Honda type 2 coolant or similar.
That should remove a fair whack of rust / sediment and prevent any further.
You can get products from parts shops that do a similar thing
An engine sitting around for a while will do this eventually too, usually the surface and nothing too major like cast iron blocks due to the Aluminium. You can find chemical cleaners, CRC I think is one of them, or you can take it to your local machine shop and they can dip the block to remove as much of this as possible.