I've never seen rust on a firewall before! Can anyone tell me if I'm screwed or if this is fixable? How deeper do you think the rust is? What would have caused this and how can I prevent future rust? It's just in that one area.

 

the cowl being filled with rotting leaves is usually the cause of rot there but its odd that its on the drivers side since usually the rotting leaves pile up by the drain on the passenger side of the cowl.

also based on how the seam is also rotted and a couple other spots have popped up I'd say its probably a decent sized patch of rust. seams like you could remove everything off that part of the firewall and do some cutting and patch work but it is a oretty cramped area. take a flashlight and look into the cowl by that area and see what it looks like in there

 

Another area to inspect is directly below the part shown in your picture. My 84 had terminal rust where the firewall meets the inner fender. And yes, it was the result of debris piling up there (directly below the C100 connector) that caused the damage. The passenger side, directly below the heater box, didn't fair much better.
That was it for me. That 84 gave way to an 86. It too had rust however that was isolated to the drivers side floor, directly in front of the seat. It was determined that it was the result of the vehicle being stored (after a fender bender) with no driver's window.

 

See that's the weird thing, the only spot there's actual rust that you can poke through is where that hole is and right to the left of it. The rest of that area is solid. The entire car is relatively rot free for a New England third gen. The floors, torque boxes and pinch welds don't have a spec of rust!!

When I first got the car I blasted a ton of water through the cowl area and a bunch of leaves, pollen and other tree debris fell down from the fender so I'm assuming that's where it came from.

The passenger side is a bit crusty near the water exit but it's not rotted completely yet. Does anyone have any suggestions on how to tackle this and prevent it from happening again? I know the obvious answer is to get the car inside and away from water, I'm working on it as 25 years of random stuff piling up in my parents garage takes a while to sort through!! I'm 20 years old and this is the first car I bought on my own and I made extra sure it was rot free before I bought it, well I guess I missed a spot!