My fiancee's mother recently passed away, and while going through her things, the fiancee found an old two blade Barlow knife.  It has a bit of rust on both blades and on the inside of the knife (see pics).  I'd like to get it back into better shape.  What would be the best way to clean it up?  I had considered using some light oil and fine steel wool to try to get the rust off the blades, but am certainly open to other ideas.

Also, would regular 3-in-1 oil be the best bet to get the knife to open more easily, or is there a much better solution?

Nice knife!  Soak it in mineral oil for a couple of days.  Take it out and wipe and drain the excess oil off.  Place it in the open position on some paper towels in the sunlight for a couple of days.  The oil will soak into all the small cracks.  Then use fine steel wool on the blades.

Thanks!  I will give that a try.

Google "rust eraser"

Not in bad shape, I have seen worse, Flitz and a linen polishing wheel.