Hey Rod, we do use the water softener and we're on Brisbane town water. What's bizarre is that the rusting is all on the bottom of the racks, or the corners where there generally aren't contact points with dishes. Its all on the undersides. The top side is still relatively perfect.
The Miele powder is an average performer, I only use it in the pre-wash chamber if its a heavily soiled load, otherwise I use the tablets. They're almost as good as Finish Quantum, but dont do as well with loads that stain, like tomato, turmeric etc. You just have to keep watching for the Miele store to have a sale, or to get a coupon and try and get them down from 44c a tab.