I've seen it kind of done both ways, the way i did mine was i followed the rust to good metal and patched it. That was on my rs which had minimal rust. On my gs if i were to repair that i probally would have to go with replacing the whole inner fender well etc. because the rust has virtually destroyed the whole fender well. i guess what im saying is the option is yours. hopefully some others can give you some better info than i can.

'95 rs turbo project
'97 gs parts car
'01 Audi s4 DD
'80 porsche 911 993 widebody, 3.6ltr