The best way to fix it is to replace the tube. But unless you're really fond of the frame, or it's especially valuable, this doesn't make economic sense.

It's unlikely that the tube strength is compromised to any large degree (any imperfection decreases the strength of a tube some, but bikes are usually overbuilt). It just looks bad. Fill it in with bondo, touch up the paint and ride it. Watch for cracks developing, and if a crack starts, then you need to do something more, or trash the frame.