I would personally run away from it, it's not worth the time and effort IMO. If the trunk rust is as you describe, the frame rails are most likely gone as well, and I'm sure the cradle and strut towers are damaged as well. Ours cars can get eaten up pretty bad and you'll never know till it's too late.
Take your time and really look around as there are good examples out there that come up for sale a reasonable prices in good condition.
By the time you fix the trunk you will find rust in other areas and have too much invested to bail.
The Fiero is getting to be like many other cars you are better off spending a little more up front than trying to cheap out and restore a heap. In many cases anymore buying the better car is getting to be the cheaper way out as so many people that redo many cars end up with more invested than If they bought the good car in the first place.
Depends what you're willing to do. It is quite fixable. My 84 (which saw Michigan winters) had a lot of sidewall damage in the trunk. But, from the strut towers forward, it was fine. As a matter of fact, the car has very little rust considering.
yup, check the rest of the rear chassis. take off the rear wheel wells and look up there. Otherwise, if those are good, it is something you can repair with sheetmetal and glue/screws, if you want, or weld in a patch panel.