NurdRage made a video a few years back, comparing multiple methods (rust, wet chemical, and electrolytic) of preparing iron oxide, and the benefits and drawbacks of each.
Just to be safe you might consider replasing chloride with sulfate.
Sure this is great way to make thermite or anything that does not exactly care about oxidation state, that part I can confirm.
Furthermore, you are close to iron(6) synthesis here using drain cleaner. Yield would be even lower, but fun is worth it. Be careful though, when literature states it blows up, they mean it.