Yes you can use that ground rod. Everything else is fine. It's a little weathered but looks fine. The wires on the load side of your disconnect are correct. They are not undersized They fall in the category of (tap rule). If your going to put a 3phase panel in I would verify the voltage first. You might have 3 phase 240. That would mean that the third phase is around 200 v to your grounded conductor it's called a (high leg).