225 Engine Rusted Where Waterpump Mounts, Still Leaks After Replacing, What To Do?

Where in King County are you? Anywhere near North Seattle?

What they describe is not impossible, but also not terribly likely. If it's what's going on, sanding it down and cramming in another gasket is not a good idea -- better to clean it very thoroughly with something that will eliminate the rust and etch the metal (like Naval Jelly and a wire brush), clean it thoroughly, then build up the pitted area with JB-Weld putty or PC Metal putty, level it with a straight edge while the putty is still workable, and then final-smooth it with fine sandpaper on a dead-flat sanding board. Then install the water pump as usual.