You have to cut out the cancer and stop the rust before you can patch it. If you just smear bondo over the rust, in a year or so it'll be bleeding right back through.
If I have to salvage a panel that has rust through, I'll cut out as much of the cancer as possible and clean the rest as best I can (wire wheels, flap disk on a grinder, naval jelly, etc). If it leaves a hole, I'll patch it with fiberglass and skim it with bondo and/or glazing putty. If it just leaves a low spot I'll bondo it. I use fiberglass reinforced bondo to build up, then a glazing putty to fill in.
Sanding is key to a good job.
I patched up a Bronco II once because I didn't have the cash for replacement panels, took a good bit of fiberglass work to do it, but it didn't look half bad when I was done. My F-150 has a half-baked rear wheel arch fix on the one side, I should get pictures of it... he got a replacement panel, put it over top of the rusted area, pop riveted it in place, bondo'd the hell out of it and squirted paint over it. And didn't get it lined up right. Of course, the rust is starting to show around the edges of the panel an the pop rivets are starting to show through teh bondo...
I'm going to do the other side right, cutting it out, flanging the panel and welding in a replacement. I can get a new panel for somethin like $25, stupid cheap as far as I'm concerned.