For us broke people, I think the primary goal is to stop the spread of the rust. I have been going over mine with a wire wheel on my drill, scrubbing the rust clean to bare metal, then shooting it with a rust-inhibiting primer. You can also use a "rust converter" product, which would probably be better. Looking into your wheel well, there looks to be more lurking about. Give your rig a good cleaning with a pressure washer, or have it steamed to remove all of the gunk off the underside and out of the hidded crevasses where it collects and rusts out. Then keep it clean. You can really extend the life of your sheetmetal by doing this.
If you do a 'glass and bondo repair, just do it right, remove and seal out the rust first, and you can have a nice result. Also look for a wrecked unit, cut out the metal off of it and weld it in place of yours...or say heck with it, sawsall out the fender, seal it, slap on some flares, lift it and slap 35's in there!
At any rate, good luck with it! Rust a horrid thing, tough to get rid of and fix. Keeping it clean and stopping the chemical reaction that causes it are the keys. Rust is very similar to fire in that it is a chemical decompisition reaction, and the "rust" itself is the flames and ashes of your metals. Stop the reaction and stop the rust. Oxygen is the catalyst in both reactions, so seal it off good...most of those converter products do work and a bit of grinding followed by Rustoleum is better than nothing!