Garlic bulb size is determined by multiple factors one of them being the size of the clove that you start with. A larger clove presumably provides more stored nutrients to sustain more vegetative growth which then helps produce larger bulbs. So, many people will save the larger cloves for seed, and eat the smaller ones. Nevertheless, even if they are small, you should still get more garlic from what you start with. The genetic material is still the same even if the growth were disturbed by disease.
Having said that, my large organic cloves failed to give me much either with all the rain we had here, and I did just as well with store bought garlic that had sprouted. So, your mileage may vary.
The other question relates to the Puccinia allii and you may wish to grow your garlic elsewhere, or in containers to try and avoid the water logging that you got this time round.