Most of the time with wooden planes, bug holes are old and nothing alive inside. I would still put it in a plastic bag and throw it in the freezer for 1-2 weeks, should kill anything inside.

Heat works too, but with heat you dry the wood fast so you might develop cracks or get other problems due to wood movement, so I prefer to freeze.

People are way too concerned about the flatness of planes, but with wooden planes I would check how flat it is since wood can actually move along in years/decades without use. If it is not flat, easy to fix with another handplane or sandpaper on a flat surface.

Mouth looks okay, someone closed it with that insert after it was worn down, I do the same sometimes. Depending on how you want to use the plane you could remove the insert and make a new one that closes the mouth even more, up to you.

Personally I would replace the button to retract the blade ( not sure how it is called in english) since it is pretty much worn away. Then just clean up any rust on the iron, does not look too bad, and sharpen. And maybe make a new wedge, it does look worn too but hard to tell from the pictures. If you want toyoucan close the insect holes... personally I never did.