Re: why doesn't iron in our blood rust even though oxygen is present there?

To an extent, it does. The iron in our blood is used to carry oxygen from our lungs to the other tissues of the body. To do this, each iron atom is bound to a large, multiringed molecule to form heme. Each heme is, in turn, bound to a subunit of a protein called hemoglobin. There are four of these subunits per hemoglobin protein, so each whole hemoglobin contains four bound iron atoms that allow it to carry four oxygen molecules. In order to bind the heme ring and still have electrons available to bind oxygen, the iron atoms must be oxidized to Fe(II), or ferrous, atoms. That is, the iron in our blood is not metallic iron, but is already oxidized ("rusted") before it even sees oxygen. As it binds oxygen in the lungs, the ferrous iron atom donates an electron and becomes a Fe(III), or ferric, atom. Put another way, as oxygen binds hemoglobin, it further oxidizes ("rusts") the already oxidized iron contained in it.

As the blood circulates to the tissues, the hemoglobin begin to release their oxygen back into the blood to nourish the tissues. As the oxygen is released from the ferric iron atoms, the ferric atoms withdraw their donated electron and return to being ferrous atoms. So, the iron atoms cycle between being more rusty when bound to oxygen and less rusty when not bound. In fact, oxygen isn't the only oxidant that can convert ferrous iron into ferric iron in the blood. Many blood toxins, including cyanide, work by oxidizing hemoglobin when oxygen is low. The resulting ferric iron-containing, unoxygenated hemoglobin is called methemoglobin and cannot bind to oxygen, such that increasing levels of methemoglobin in the blood mean decreasing levels of oxygen being carried to the tissues: something like blood asphyxiation.