![Image](http://i1074.photobucket.com/albums/w411/janedcb/IMG_0647.jpg)
![Image](http://i1074.photobucket.com/albums/w411/janedcb/IMG_0648.jpg)
I'd suggest that's better than most. For a permanent repair (well, at least as long as the original lasted) the rust between the layers needs to be removed, and the rear panel welded back on, and re-sealed. For a medium term repair (several years) wire brushing back to shiny metal and working a phosphoric acid based rust remover into the seam will slow it down a lot. Mine was in a similar state about 8 years ago, and this treatment, repeated every few years means that it's only this year I'll have to think about cutting out and welding it.
Chances are it's a crack in the sealant behind the wheelarch which is letting water between the layers, so if you can find that and rectify (or at the very least spray lots of waxoyl around which will help seal it), that will also help.