Russell understands what things do, but he doesn't understand how or why they work that way. This isn't necessarily a Russell thing, by the way. For example, I know that a car can take me from point A to point B, but I barely understand how a car engine converts stinky fuel into kinetic motion, and I couldn't explain the concept of gears if my life depended on it. But so long as the car works, I don't really concern myself with those details. I'd hazard a guess and say most of us think this way about most parts of our life; if we need to know more, we can easily educate ourselves.
Rusty thinks this way with, well, life in general. He (thinks he) knows that if you do X, Y happens, and he doesn't trouble himself with the details- even if knowing those details would save him a lot of embarrassment. For example, if you study at a college and maintain a certain GPA, you get a degree. For Russ, his understanding ends here, which is why he thinks his paralegal degree is the same as the degree earned by an actual, bar-certified lawyer.
Since Russ lacks understanding of the nuances of the world at large, and since his narcissism precludes him from learning more, this leads him to experience the Dunning-Kruger effect across nearly all areas of his life- in particular, the areas that matter to him the most (wooing and suing).
I don't think he's got a sub-average IQ. I think his narcissism has made him a moron. He has convinced himself that he knows better than everyone else, and so he refuses to learn more. When this attitude inevitably bites him, he convinces himself that he's not wrong. If he admitted to himself that he got it wrong and educated himself, he could succeed in at least some of things he does (getting fit, for example.)