In order to fix that properly, first off you need plenty of access to it. That means removing the rear seat, V-brace, and figure on taking off the rear suspension on that side as well. Next, if you look in your first pic, you see the metal piece in the upper right that is partly gray and partly red that the V-brace bolts to? That is part of the package shelf, and it is attached to the shock tower. The combination of the V-brace, shock towers, and package shelf make up a structural part of the car that transfers suspension loads when turning. When you cut out the part of the shock tower and detach it from the package shelf, you better have some temporary bracing welded in to prevent the structure of the car from moving. Once you have enough access, you need to get in there with a cutoff wheel and cut out the affected area. This is pretty thick metal here, so a little dremel tool or air saw is not going to be powerfull enough. Now lets move further down to where the shock tower meets the trunk floor. See all that seam sealer there? First all of that has to get ground out, then underneath it will be a whole bunch of spot welds. Each spot weld will need to be drilled out, but only through the upper layer of metal, leaving the lower layer untouched so that you can weld the new piece to it. Once you have your rust area cut out, you now need to either fabricate a new one, which will be difficult if not impossible given the compound curves and the thickness of the metal, or go do this same thing all over again on another car in the junkyard, making sure to cut the new piece bigger than the hole in your car. Once that is all done, you will have to measure everything, make sure the hole for the shock tower is in the right place, and weld it back together from both sides, then re-apply the seam sealer where it meets the trunk floor, and the undercoating in the wheelhouse. After doing all this, I would also want to reinforce it with at the very least a shock tower brace between the 2, and possibly tying it into the package shelf as well. If this car has sentimental value to you, and it is important to keep this body, and if you are handy with a cutoff wheel and a welder and have several days to devote to this problem, then have at it! If the intention here is to make the car sellable, here's something else to think about; the right way to fix this, according to Ford, would be to replace that whole wheelhouse assembly, which can only be done by removing the quarter panel and installing a new one. Ford does not specify a location where you can safely section this piece, so if you sectioned it, and the weld location failed, you would be just as liable for selling an improperly repaired car as you would be for selling it as is. Matter of fact, you would probably be more liable because if you sold it as is, you have the plausible defense of saying you didn't know, but if you repair it improperly, you can't plead ignorance.
So figure a week of work for a repair that won't be proper, may rust out again, and still won't let you sell the car with a clear conscience, vs $1000 for a rust-free shell and a few days swapping your engine/trans/suspension into the new shell, then scrap this body for $400. It's your car, so its your call, but that is why most of us say the car is done.
-91 Cougar LS, coming soon, complete overhaul
with a 427" Windsor.
-90 XR7 5-speed black on black w/sunroof, MP2, coated rotors, double intercooler, 15%OD, ported heads, comp stage 1 cam, 85mm TB, 90MM LMAF, 80# injectors, and ported big valve heads
-98 Mark VIII LSC, Procharger P600b, TR3650 swap and 3.73s.
-90 SC Automatic rustbucket winter beater
-97 Tbird Sport 4.6 Nice weather daily driver
-"Your buddy Mike is INSANE!" -ClintD's dad