Freeze Plug Sludge

I have noticed a freeze plug leaking after I put the motor back in my 73. So today I went out and plucked it out and noticed a diecent amount of rusty deposits and some sludge behind the freeze plug. I was able to pull some of it out with my finger, and its a little alarming. This motor has run really really well, i just pulled it out to paint it and paint the engine bay. It ran a tiny bit hot (bout 205-215) and that was before I was able to put a 160 thermo in.

Should I be fairly concerned about this, or will it all be able to come out with a good flushing? anyone come across this before?