You have a long road ahead, but I don't think its hopeless. No one can say for sure how bad it is, just looking at a few pictures on the internet (@Chris, @S.McArthur and @jodomcfrodo ). That isn't really helpful to the OP anyway. He asked how to fix it. Its up to him to decide if He wants to make the investment. I see a LOT of Flaking rust, but I don't see any ugly cracks. That is a good thing. Take a look at my build thread (link in my signature) and you'll see that I wasn't that far off where you are when I started. I've knocked the rust off most things, but will need a tub replacement in the future. My frame is solid, except for one area near the rear bumper.
First things first though. Don't worry about appearance right now. Its important to figure out how bad the frame REALLY is. Get a Borescope. The ones that connect to your smartphone are pretty cool. I think they are a few bucks on Amazon. The areas you want to focus on are near between the lower control arm mounting points, where the skid mounts to the frame. This can give you an idea of what the inside looks like. It should be smooth.
Also, take a ball peen hammer and tap on the frame along the bottom. Solid steel will ring, kinda like a bell. Rusty steel where it has started to delaminate will sound more like a thud. The sound won't ring though the frame like it would if it were solid.
Once you know if its a solid base or not, then you can start planning how to mitigate the rust. I can't imagine paying someone to replace a frame...though people do. That is an option. You can also knock the rust off and repaint it. I use a needle descaler. Works WONDERFULL! For heavy, crusty rust like you have, its really the only option (short of bashing it with a hammer). A grinder isn't really going to do it. Then, just take your time. Work in small sections, and go from front to back, side to side. You're going to spend a bunch of money on fasteners, paint, brushes, cleaning supplies; Get frustrated dealing with bolts that want to break or are seized; and ask yourself why in the F*** am I doing this. BUT...at the end, you'll have something very nice. Only you can answer if its worth it though.
I agree... It will be a long road ahead if I decide to try to fix this. I'm not sure if I can but if there is some hope (as in NOT finding frame rot behind the skid plate ) I'll just take it a little at a time. The advantage I have is that it is not my main driver so I can let it sit until I get around to working on the next thing.
Borescope will be here by mid week and we will see what the inside looks like. I'm going to expect that it ISN'T smooth on the inside. (expect the worst and anything else is good news ha!)
I did the ball peen test and will post the video further in the thread. Feel free to give your take on it.
I had planned on using a needle descaler. I have seen one used in a jeep video and it did pretty good. The next option would be the wire brush type attachment. I know that probably wouldn't get it all though.
Thanks for the general overview of how to work through it all. That's the kind of info I was hoping to receive. Someone who has done a restoration of a rusty frame and can share information they learned, which it sounds like you are talking from experience... ha