Thae wire wheel doesn't get rid of all the rust. You may find as you weld the impurities(sp?) will cause bad welds.If you get it in there is no saying this piece won't rot again.
I can't recognize that piece, where does it go? I agree fabing that may be a bit of a pain in the ass, but not impossible. I would try getting it blasted before you make any final decisions, you may find a sea of pinholes rendering it useless.
just my $0.02
Matt