What is the diameter of the hole if it is Small1/4" or less your plan seems ok,if larger we would recomend at least glass cloth on the inside before the fill and sand routine best bet would be to fit a ply filler then glass inside and out, I know it sounds like a lot of work but you need to keep the hull's watertight integrity after all the work you did to build her

The hole on the outside is about 3/16 x 3/8 and affected area is about 1/4" x 1/2". There is shredded wood on the edges and inside. What do you mean by 'ply filler'? Are you saying to insert a piece of okume or applying the wood flour and epoxy in layers? Thank you for the recommendation to glass the inside.

Ouch, it hurts when our babies get wounded. 

Perhaps this is the time for an artistic cutout, an oval, diamond or fish shape to get back to clean wood.  feather the edge of the opening, fit a new piece of contrasting wood (or same color if you want to hide hole), glue it in and then epoxy with glass inside and out.  A lot of work but it should be as strong as the origional when done.

 You could always do a quick patch and then clean and redo during the off season.

good luck,   Ed