[mr48chev]

First you have to clean all of that tar out of there before you can do anything. Then get on the bottom side and make sure you have it just as clean of any tar, undercoating or grease as the topside is. I had a good bonfire going one time when I started welding on a floorboard before checking the other side to see what was on it and assumed that it was bare or just painted metal. That old spray on undercoating burns pretty good.
From what I see I agree with the cut out just what you need to and put in smaller patches. Get back to solid rust free metal and go from there.

I saved the photo, flipped it because my old eyes don't do sideways well at all and the expanded it out on my laptop and can't see all that much rustout unless that tar is hiding a lot.