For my own cab, I did the following:
First I built a new bottom, since the water damage was so bad. The particleboard had swelled to almost twice its normal size and would crumble if I looked at it funny. Next time I'll hold out for a cab in better shape. Live and learn. If you have to contend with water damage, hopefully it's something you can seal/glue/bondo and sand to make it smooth and secure.
Then I bondo'd. I had no experience with bondo, so it was a learning experience. It sets in about 6 minutes after you mix it, so do small patches at a time. I've heard of people using other wood filler compounds, but I've only used bondo. Since bondo dries hard, do it before sanding.
To prep the surface for paint and smooth the bondo, I used an orbital sander with um..150 then 220 grit. Something like that. Auto finish nuts will insist on like 800 or 1000 or something like that, but I haven't found those in orbital disks and sanding by hand sucks.
For painting, I used a household oil-based latex paint. Something like Bulls-eye. One coat of primer, brush with 220 grit, then two coats of black sanding in between. Again, I'm some nut with lungs full of paint will know better, but this worked for me. I applied all three coats with a foam roller. If you have access to and can use a hvlp spray gun, I hear the results are amazing. Using a foam roller is pretty good, imo.
I followed some "rules" as I picked them up on the forum. I've heard of people using water-based latex with no ill effect, or mixing bases for primer and color coats with no ill effect. Ultimately, it's your cabinet, and your friends probably are not going to inspect the thing looking for where you filled holes (or didn't have the new 8" on the bottom QUITE even). Especially after it gets artwork.