I've done some rust repair on my '01 Corolla (not to mention numerous Tercels) and the best thing I've found for preventing the rust from spreading even after you "fix" the problem areas is to use
POR-15. They have an inexpensive
starter kit which contains everything you need to do the job (and that little can goes a
long way).
Basically, you grind away as much of the rust as possible (I tend to just use a wire brush wheel on a cordless drill, but that one wheel arch might need to be attacked with a grinder as well), then there's a two-step prep process (a detergent, rinsed w/water and let dry, then an etching agent, also rinsed with water and let dry), then two coats of the POR-15. Spray on your primer while the POR-15 is still slightly tacky for it to actually adhere. A lengthy process, but it loves to adhere to rust, so you don't have to worry about getting perfectly bare metal, esp. if you can coat both sides of the surface w/POR-15.
In the past I always got down to clean metal and did bondo & primer, but it seemed to rust out exponentially faster. With the POR-15 I've never had a patch rust out again, so it's well worth the extra work.