Hi, Mark. Exterior wood will always be a problem, particularly on old houses that do not lend themselves to be covered with aluminum. The best solution is to keep the wood painted and water running off, not staying on the surface.
For some areas, you might be able to grind out any rotten wood with a motor tool (like a Dremel) and appropriate bit or one of the motor tool bits in your electric drill. You want to be sure that you get back to good wood when you do this. Then mix up some automotive Bondo and fill the holes.
For big holes, you can cut cardboard larger than the hole and tie a string in the center. Fold and insert the cardboard into the hole, pull on the string and apply one layer of Bondo--on large holes you will probably need two layers. Then sand the Bondo patch level with the surrounding wood and prime and paint. Remember that you do not have much working time with the Bondo. The patch will last longer than wood but it will still do no good if you have not fixed any problems, like in your gutters and downspouts, that allows water to stay on the surface.