Typically, an automotive master cylinder is actuated by a rod, either from the brake booster or directly from the pedal. The rod is not generally directly attached to the piston in the master cylinder. It is not uncommon for the piston to hang up in the bore after brake release, and for the brakes to drag a little. This is not usually a problem, and the brakes don't usually drag to the extent that they smoke.
It doesn't surprise me that there would be corrosion in a boat trailer brake cylinder. Boat trailers are often submerged in water, and sometimes in salt water! The brake cylinder used in a corrosive environment like this should either be well-sealed or made of materials that don't corrode, like the one that you installed.
Hydraulic brake systems are not maintenance free. Brake fluid, being hydrophilic, will absorb water over time and the corrosion seen on the aluminum piston/bore is the end result. Bleed your system out yearly refilling with a high quality brake fluid from a fresh, unopened container and you will greatly reduced the chances of this type of failure.
Good article with a clear thorough explanation of the mechanisms. As I was reading, I mentally concluded that the actuator simply needed a stronger, more robust "return" spring. I wouldn't have continued into the internal cylinder and discovered the corrosion! Good work - Very thorough.
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