Your A&P is correct. It isn't the reduction in area of the crankshaft that's the problem, but the rust pitting creates stress risers where the crankshaft has a greater likelihood of cracking and eventually failing all together. As a point of comparison, check the Lycoming service bulletin/FAA AD regarding corrosion pitting on the inside of the crankshaft bore on Lycoming engines (Lycoming SB 505). Those cranks get failed for significantly less corrosion than is shown in your photos. Yours can be reground to remove the pitting and returned to service.