Sounds pretty unpleasant.. that large chunk that came out may well have been some internal structural element of the tank; a bulkhead, support etc. This tank might be a loss.. What are the possibilities of getting a replacement?
I've seen some pretty extreme measures taken on impossible-to-replace motorcycle tanks. Cutting out chunks (bottom mostly) with a fine saw, then manually cleaning/repairing, and re-welding the tank into one piece.
Kreem-Kote and similar products can work wonders, but I've also seen them make things even worse. The quality of this kind of treatment depends largely on how well the acid cleaning/etching process works. In the case of some badly rusted tanks, the acid etch results in seam leaks or other holes in the tank; the rust was literally the only thing holding it together.
I've got some rust going in my Motobecane tank as well.. which is integral to the frame. Not sure how bad it is yet; best of luck to both of us!