Thank you very much! Frame is not as bad as the axel housing
PLEASE CHECK THE FRAME CAREFULLY before you tackle the rear end. the worst i found was behind the gas tank, i put my fingers thru it! the welds on the forward control arm plates are where the rust started. Or came thru!
That rear does not look that bad, so the "replace the axle housing" advice is more than suspect. Bent, broke, maybe. Rusty and scaly - heck no.
A small hammer, a chisel, and most importantly, a needle scaler and compressor to run it will make short change of descaling that housing.
The needle scaler will find any weak points in the metal , if any.
Once its descaled you have a few options. For that level of rust, i;d opt for POR-15 basecoat, after a full water-based degreasing.
Rust Prevention Products | Rust Stopping Products - POR-15
prep is key for any paints or resins ( POR is a resin) . For topcoat gloss will never look nice on a acned-up housing so matte nat gray, dark olive or black topcoat, whatever your preference.
FYI :
https://www.harborfreight.com/air-needle-scaler-58645.html
Eye and EAR protection are key. The needler really "rings" on metal, so quite the racket. Neighbors wont like it. I was underneath working the frame and such, so a full face shield was required. Ear plugs for sure. ( and im a vet of close combat 'drills' )