I think you're fine. The brass on the inside between the stay end and the seat lug makes me suspect that there was a crack there too. Seat stays do crack loose there on occasion, despite, or perhaps because of, the oft repeated mantra that seatstays aren't under any stress.

Clean up the blobs with a file, rat tail file, and emery. I'd leave as much as possible of the repair brass fillet to the seat lug. Just get it smooth. Try not to sand the steel anymore. Inspect again for cracks. Should be good to go.

PS if you hold the file lightly against and parallel to the stay, it should just grab the soft brass high spots and maintain the shape.