Remove all of the rust out to about two inches or so from the affected area. A dual action (D/A) sander with 80 grit or a cup brush on an angle grinder (Harbor Freight makes a cheap angle grinder
[$15] and cup brush
[$3]) will take care of that in a hurry.
Then sand (220 grit) to feather the edges around the repair area.
You must then treat the metal with a rust inhibitor to keep it from returning. I personally like Boeshield (available at Sears) for this but be careful and wear chemical resistant gloves. Most rust inhibitors will also eat paint, so...
Next, mask off the areas you don't want paint on and then prime the area with a good quality primer. Sand with 220 again to smooth make sure any pitting was filled and then shoot again.
Once it is thoroughly dry you can shoot it with your color. Dupli-Color makes a pretty good product. It can take a few light coats to build up to where it needs to be. Please let the paint dry completely before re-spraying!
Wet sand starting with 220 wet/dry paper if you need to remove any orange peel or other imperfections.
If you had clear coat then shoot it once or twice and wet sand if needed as before.
After a few days wax it and if you did it right you may never know there was a repair!