My opinion on the rust. . .
Get a compressor and die grinder as soon as you can.....and bust that baby down to steel. Dont worry about paint, take all the rust off you can see. ANd i mean ALL of it, inside and outside.
It may just be easier to cut out a big whole and add in a patch piece.
But you'll want to use etching primer on the rust after its done (DONT LET IT GET WET WATER WILL GO RIGHT TROUGH AND RUST AGAIN! And withing weeks of the new paint on it.) Then coat it will expoxy primer. Then with a regular primer to bring it up and work out the shape. Then paint etc.
Thats basically what we did on my rear areas. Theres only one spot of rust were it was really bad (right above the exhaust pipes near the edge of the trunk). We'll have to keep an eye on it. But we added years to the car.
'95 Bonneville SSEi - Forest Green Metallic/Dark Tan Leather 136,000 Miles
Mods: Custom Intake w/K&N RX-4750 and custom CAI box, 180 Stat, 24k GVW Tranny Cooler, ZZperformance SC coupler, Sylvania Silverstar (low beams), Michelin Pilot Sport A/* 225/60/16 Tires, RSM Rotors w/Raybestos QuietStop Ceramic Pads, Gold Painted Calipers and Drums, Vented SC cover, Taylor Pro Spark Cables, NGK TR55 Plugs, Red Interior Lights.
Current Projects: 2.5 SC Pulley, Ram Air, Header Wraps, Muffler + Hi-Flow Cat