You've got two things going on here.
First, If you were failed for a state inspection for the rotors being rusted, you by all rights need to speak with a DMV inspector. (Or whatever you call them there DOT? AOT? Maybe the state police do it there?). I hadn't looked when I replied previously, but provided that the inside looks the same as the outside, those rotors do not fail. Going to another shop is what "some" people do. Most just get the work done at wherever the car landed for it's inspection. If nobody calls out a bad inspection to the DMV, nothing will happen. The front desk at the shop will ALWAYS be VERY concerned, and glad to take your complaint.... But if you want something done about crooked and unfairly leveraged upsells, you have to go not to the inspection mechanic's boss, but the folks who issue the credentials to the technician to perform these inspections.
Second, you've got pad/caliper issues. Stuck caliper slides, pads not sliding freely in the lands, rust jacking under the hardware... You need a proper going through of the brakes. The calipers and caliper brackets cleaned back to funcitonal, new pads (that taper is wedging the brake pistons crooked...), which means that all of them need to come to apart. (If the calipers are in good order, they need not have the hose removed...) But all of the rest will be apart and loose. And sadly, if you're taking it to have that done, (Which you or someone need to, even if it passes...), you'll have to do the math, but it might make the most sense to make it all new in one "labor", and give up on the last 20 or 30 percent of the rotor's life. Those are good, and working, right now... But the actual damage, the kind that they should fail for, is already in there. It's not visible yet, it can't be inspected, and it isn't affecting brakiing yet. (The dragging pads are though...).