I caught a Calico today, with a 6" piece of monofilament coming out of it's mouth. The rusty hook can still be seen deep in it's throat. The catcher here is that the old line had thick sea growth all over it. Tried to reach for my camera, but the fish slipped out of my grips... The fish was obviously healthy enough to bite my bait...
I've seen the rusty shank of a hook coming out of a sand bass' ass, with the line (covered in algea like you mentioned) coming out of the mouth. Fish seemed fine.
One of the BIG Blue Fin Tuna from last years trip to Mass had an old long line hook in its belly. It had stomach tissue all around it so it was probably in there for quite some time.