I don't see any rot in that picture, Frank. I see the loop of a carpenter ant tunnel is all.
You don't need any poison paints, which won't cure (as opposed to prevent) rot anyway.
I'd use epoxy and fairing compound...you can dye it to match....get the microballoon-type "fairing" filler-thickener as opposed to the adhesive type for ease of sanding. West Marine or another large marine store.
For rot pockets, cut out and let in new wood, or treat with a Smith Enterprises epoxy product called CPES.
““Perhaps then, you will say, ‘But where can one have a boat like that built today?’ And I will tell you that there are still some honest men who can sharpen a saw, plane, or adze...men (who) live and work in out of the way places, but that is lucky, for they can acquire materials for one third of city prices. Best, some of these gentlemen’s boatshops are in places where nothing but the occasional honk of a wild goose will distract them from their work.” -- L Francis Herreshoff