I am replacing the portion of the longitudinal in the engine compartment. I have painstakingly cut the replacement panel to fit (a little here and a little there) and when I have finally gotten the panel to sit more or less flush with the old metal on the inside face (see first pic below below) The flange on the back side is missing the wheel well panel by 1/4" (see further below) Is this just a simple case of "beat to fit, paint to match" or should it be a closer fit?

Click to view attachment

Click to view attachment

Any help would be appreciated

you can have up to 1/8 inch gap between the panel but the closer the easier it will be to weld,, you can do a samll spot where the fit is good and pry , convice the better fit , as you go ,, spot then do one 6 inch further, line it up spot, do the same again and again,

Start welding where the gap is small or closed. Weld a 1/2 " then stop and with a ball peen hammer tap the gap closed and weld another 1/2". Continue until done or beer runs out.

Is that photo from under the car looking up?

no it is looking down from the top but there is a similar but slightly smaller mis alignment doen there as well. At least at the bottom I can encourage it into position with visegrips, at the top there is very little to clamp to.

I still can't tell what I'm looking at but to weld that gap is easy with a good mig and a ball peen hammer. Welding is my thing, FG or body work sucks.
Just make sure to grind out (and if possible sandblast) all the rust so you weld good metal. You can weld rusty metal.... but it will be porous and rust faster.

I have cut away all the truely rusty metal and then a little and I have been using a palm sander with emery paper to remove the remaining paint, surface rust and galvanizing(from replacment panel), The remaining heavy rust is on the next panel to be replaced