I'll be watching this thread to see how you fix that area. My 2002 wagon has terrible rust on the back edge of that wheel arch (due to a hole above the mud flap allowing water in). I would love to find a donor car with no rust and matching color, then cut off the wheel arch body metal. I'd grind mine down, have a shop weld on the new arch (from the underside), then seal it up. Yes, there would be a ridge where the new panel sat over the original body, but I don't care. I can't pay to have the whole panel repainted, so putting new over old seems easiest.