ANYTHING can be repaired.
But rather than using a "rasp and sandpaper" as you suggest, or trying to make an ugly hole look "pretty", why not just replace the whole section of wood?
I did something similar for busted pivot holes.
Dino's Guitar Works
I'm not saying this guitar is worth the time or trouble, but if you were to try to repair it, I honestly think replacing that section of wood is your best bet.
JMO