Bummer - that seatstay is a goner. Did you make / enlarge that hole, or was it received like that? (The crack very well could have been initiated at the edge of that hole if the seatstay was under tension.) Bad internal rusting would just exacerbate the situation.

Unless this is a very special frame, It's probably done. You are looking at probably north of $1000 to have that seatstay replaced, and the rear triangle re-chromed. (To do it right. Probably still $200-300 just to get it fixed to where you can rattle-can it and ride.)

Even worse, that kind of rust usually doesn't happen in a vacuum. I doubt the other seatstay is any better.