I have a 2007 truck that has a rusted out rear fender. The question that I have is when I weld on the new panel how to I finish the seams where the panel meets the outer wheel housing support? Do I use seam sealer? Does it all get welded together? I read that there is some kind of insulation material up behind there and that along with debris is why it all starts to happen. I plan on taking that insulation out and not replacing it. Is there any measure I can take with coating the underneath when I am done with repairs so it will be protected for a long time like factory? Pictures below:

Rust repairs have been covered in detail in prior threads as are welding techniques and sealing welds.
With all rust issues It always goes deeper than what you see on the surface as Cars and trucks rust from the back side out.

It would be my suggestion to remove the outer half of your wheel well to gain access to the back side of the panel to be able to work your weld seams from both sides of the panel.
Then after the panel is repaired you can install a new outer half of the wheel well.

Yes they do use a insulation type of material between the outer wheel well lip and the panel wheel well lip. As it ages it does break down and does hold moisture which I be-leave causes OR contributes to the wheel well lips to rust out as the moisture cant get out or dry out, In my experience panels that are welded together and left with just paint protection between last longer with out rusting Or have less corrosion damage.