Yes this is the brake pressure regulator and they seem to rust really badly.  I guess it is because they are made of cast iron and they are not painted or even plated from the factory.  A new one runs around $95 but I am not sure if they are still available from VW or not.

Ken Wilford
John 3:16
www.vanagain.com

-------------- Original message --------------
From: Allan Streib <streib@CS.INDIANA.EDU>

> Looking around under the front end of my '91 Vanagon GL, I noticed a
> very rusted part, evidently part of the brake system, since it has
> two steel brake lines connected to it. This mystery part is mounted
> on the right frame rail near the sway bar. Is this the "pressure
> regulator" that I see on a couple of the parts web sites? The rust
> is just falling off it in chunks unusual because there is not really
> much rust anywhere else under the front. Do they normally rust so
> badly?
>
> Allan