First, the rust.
When GM downsized their big cars in 1977, and the others in '78, they went with a thinwall frame concept. The frames were relatively large in cross-section, but the metal was thin. They were not rustproofed well, and most were a C-section in places, allowing dirt to accumulate inside the frame and hold moisture, resulting in considerable rust-out.
If you car is like most GM's of the day, your worst frame rust occurs between the rear bumper and the rear axle.
Try taking a hammer to the rest of the frame. Chances are, lots of the metal surrounding the rust holes is paper-thin and the hammer will go right through it, so your rust problem is actually much worse than it appears. That hole just in front of the rear axle is especially bad.
Unfortunately, Imo, your car is not safe or roadworthy to drive as-is. Sure, it may last a while longer if you drive gently.
But eventually you will hit a big pothole or have a emergency stop or turn which will bend the rusty frame, or a control arm will tear loose allowing probably the rear axle to shift and you may lose control.
This kind of rust is usually difficult to repair. You can't just weld little patches over the holes because, chances are, the frame is rusty and weak front to back, so there is little solid metal left to weld to.
An experienced welder/fabricator can cut and remove large sections of weak, rusty metal, then make and weld in new metal sections. But this is expensive and time-consuming. Your car is definitely not worth the money to fix.
Around here, the cops keep an eye out for cars with this kind of damage, and will seize the plates when found, essentially removing the car from the road.
You could sell it as-is for parts, or locate a similar, rust-free car and use this one for parts.
BTW, don't feel too bad about this. It has happened to millions of Rust-Belt car owners over the decades. I have a 1968 T-bird that was FAR worse. Essentially the front and rear quarters of the frame were connected by fresh air. I fixed it but it was a heck of a lot of work.
As for the engine, it's not blow-by. These engines had a habit of having engine oil leak past old valve seals, allowing some oil to burn and depositing carbon on the plugs, pistons and valves. These seals can be changed fairly easily. But the gas smell indicates carburetor problems. The choke may be sticking closed, the choke pull-off is not working etc. Sound familiar?
