Starting project! Metal repair help!

1st off stripping all the way down is the best thing to do. I would get it to bare metal then apply an etch primer 1st, then the expoxy primer.
Hitting that line out from the back side with a body hammer will work but you have to be carefull that you dont make it worse with high spots. either way you will need to apply some bondo. i would rather fill the low spots then try to blend in high spots. tap out as much as you can (slowly) use a sand bag or something on the outside to keep the area from distorting.