Chris, do we have a "is this rust bad" resource with some advice about best places to look? Like how to check the inside of the frame, or between the frame and the skid plate, etc.?
I get the feeling that the rear axle is a swap from something else, and the bullet hole you marked out is likely a bracket that was cut off with a torch, and wasn't really ground smooth; and the repaint either wasn't done at all or was done poorly. But that's just a wild guess.