Short answer: The terms of the unlimited warranty define your satisfaction with the tools, and repair or replacement based on that satisfaction or lack thereof. Recent statement by a Sears VP would indicate that Sears would/should replace them.
Correct answer: Letting your tools get rusty (I have an uninsulated shop, but keep my tools wiped with oil, WD-40, etc. to prevent rust) shouldn't be a cause for warranty replacement. While the warranty technically/officially does cover rusty tools, it shouldn't be exercised due to owner negligence. Get some steel-wool, a brass brush, whatever abrasive you desire, get some WD-40, clean your tools up, and determine a better way to protect them (insulate your garage, keep them oiled, bring them inside, something).
Continued "abuse" of the warranty is eventually going to lead to warranty terms changing, like it already has on several items.