From what I've heard that sounds legit based on my experiences, getting stainless really hot will burn off some of the chromium content. If you notice, the problem areas are in the heat affected zones where it was cut.
I don't recall all the properties of the different grades of stainless, but in my experience, 304 isn't meant to stay rust free. Its used a lot in exhausts where looks don't really matter. 316 tends to be the most common for cosmetic fixtures.