Thanks for this post-- my 95 Legacy sedan has this exact problem on both sides. I've been considering taking two giant rubber mudflaps from one of my father's old trucks, cutting them to fit, and screwing the rubber in to help cover these holes you are talking about. I haven't tried it yet but if I do, I'll let you know how it works.
Also, my first vehicle was an old Chevy S10. I remember getting two cheap metal quarter panel skins to put over the rotted quarter panels / over the wheel wells. They looked similar to the one I attached a pic of.
Seriously--- why haven't they made quarter panel skins that fit the 2nd Gen Legacy's??????? It's a terrible rust spot for these awesome cars, and I remember it was a 15 minute job screwing on the quarter panel skins to my S10.
***If anyone knows of where to buy some, PLEASE link me.