how do i even began to fix this rust (video included)?

handsomeman

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http://www.youtube.com/watch?v=erXDKDcToMk
I bought it for 500, i want to take a stab at it, i was thinking of ordering wheel well replacements off ebay but the wells would only cover the difficult portions of the rust, i still got the rockers too. The engine needs a swap also cause it blows out white blue smoke bad, doesn't overheat though. I was thinking of just swapping an engine out of a junkyard so i can save money. But how do i fix this rust?
 
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