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I always tried to get them on the inside, so the final contour will be the same as original. If they're outside, the surrounding area has to be built up to match a slightly higher contour - can cause some unforseen headaches. If you could get a flange tool, one that puts an offset in either panel, allowing them to fit together flush - that would probably give you the best job. Then you can do it either way that works best. Try to have as little overlap area as possible. (can be a rust prone area if too big) The flange also gives it more strength, makes it less likely to warp during welding.
I would butt the panels and weld flanging with the wheel lip can cause problems and leave a place for dirt and moisture to gather I also drill holes on inner panels for plugs so you can remove plugs to clean out Remember to not rush your welds!
If you are doing a patch panel go from the inside. When you are done you can go back on the inside and run seam sealer, undercoat the area or do whatever you want to try to keep it clean and dry back there so the rust won't return in a hurry. Most shops nowadays use the weld bond kits on patch panels. It works quite well and will give you and extra seal around the edges that will help to keep moisture away. You may find this easier than welding and you wont' run the risk of warping panels. You also won't have any welds to grind down and have to smooth over. A lot of shops use these kits on 1/4's, roof skins, etc instead of welding. Thats a debateable issue, but for a patch panel I think they are ok.
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