Oh boy.....sounds like a project. Here's my recommendation after being in the midwest my whole life, working on hundreds of rust buckets, and then seeing the light on my own vehicles for the past 25 years (perfected in the last 10-12 years).
If you have flaking rust, get yourself a good wire brush and a vibratory scaler (long metal rods in a group, air powered). Then, proceed to remove all loose stuff you can get to and blow clean with air. If the area has oil on it, then clean with brake clean or equivalent. Get a couple cans of aerosol rust converter and coat those areas per the instructions (2 coats or more). Let cure and cover those areas with aerosol truck bed coating (dries hard and doesn't flake easily with a good base).
After you've thoroughly cussed out your project by this point, you are on the home stretch. After it's all been coated and cured, then get a good rust proofing gun, 2 gallons of fluid film (or woolwax), an old metal pot, and a pair of clothes you don't mind trashing. Jack up vehicle for good access.
1. Dress in said clothes
2. Heat fluid film or woolwax in metal pan until liquid like 5w-30 or 0w oil
3. Pour into rust proofing gun
4. Work from inside to outside of frame underneath. Coat the heck out of EVERYTHING metal, painted or not. (Overspray onto rubber parts doesn't seem to be an issue in my experience, so just lather it up)
5. Repeat process for rocker panels and other areas by removing factory access plugs.
6. Repeat again for doors and inner fenders as you move out and up.
This is the best time of year to do this. Once coated, this film will migrate in the hot weather and seal all the cracks and crevices with a protective layer. It's not a fix all with rust already present, but can definitely seal it off and slow it way down.
And.......to answer your initial question: no, undercoating doesn't hurt brake lines, or anything else. Just keep it off the braking surface.
