Replacement exhaust systems are conventional bolt-together style. See the Performance Products catalog diagrams.
I don't think that's anywhere close to a structural rust problem. I think that would be a place where you could cut it out, clean it up, treat it and patch. In my case it would not look so hot because I don't know sheet metal work that well, but it would be usable transportation.
Probably not the best car for a Minnesota winter - but you could get some use out of it much of the year. The diesel might gell on ya a bit if you kept it outside.
Ken300D