Is it a bad practice to remove all the unused screws from my frame (i.e. for the mudguards, front/back racks)? Could rust be an issue? Even if the holes for the screw do not expose the inside of the frame?
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If you're a weight weenie then your frame wouldn't even have those mounts.
Removing the screws might save you 10-20 grammes, which is less than a good dollop of mud, or under half a snackbar, or a quarter the weight of your spare tube.
If you're worried about rust, remove screw and apply some grease then refit.
If you're really worried about rust on the bike then fit mudguards, for which you'll need those screws anyway.
Answer: don't bother removing spare screws/bolts from your bike.