The shock coil insulators (the black rubber coverings) on both sides in the front of the car have cracks, and I can see some rust on the metal of the shock absorber inside. Is this reason enough to change out the part ? A quick look at bentley's made me think that the entire shock/strut/coil mechanism would have to be removed in order to change the insulator.
It is true that you need to disassemble the strut in order to remove the insulator, as that "insulates" the top of the coil spring from the spring seat. What you have seen by itself is not reason to change the strut and insulator. However if your car has more than 60K miles on the odometer and/or you note clunking, a rough ride, etc. then it is likely that it is time to replace the struts and the insulators above and below the coil springs.
Signs of a fluid leak are definitive for strut replacement. Try the bounce test: bounce the corners of the parked vehicle up and down, then stop forcing the motion and watch the vehicle's response. If the motion isn't damped in one-half to one oscillation, that corner's strut needs replacing. An analogous test is to have someone follow you as you drive on a somewhat rough road and watch your vehicle's motion after bumps. If the car keeps moving up and down, replace your struts.
I don't think the bounce test is useful for vehicles that are more modern than 70's Detroit cars with very soft springs. Even when Prius shocks/struts are worn the car will not repeatedly bounce when that test is used. I agree that substantial fluid leakage is a good sign that the part is bad; however lack of visible fluid does not mean that the part is good since the fluid is very low viscosity and will evaporate pretty quickly in hot ambient temps. My personal experience with this is the RF strut on my 2004 which was totally bathed in fluid a couple of years ago. I deferred replacing it for a couple of months while on business travel. Upon my return the strut was totally dry.
I largely agree. The old bounce test won't prove a shock is good, but if it fails the old bounce test it's really bad.