Fiberglass mat, also called chopped strand mat, has binders that dissolve in styrene found in polyester resin, but not in epoxy. West System report (
http://www.westsystem.com/ss/chopped-strand-mat-epoxy/) that mat can be used with epoxy, with some limitations (with the binders not dissolved, the mat remains stiffer and thus more difficult to use on more tightly curved surface. Also, the binder will get enclosed in the epoxy, which means that the mat will not become clear (as fabric would be).
So you may hear advice against using it with epoxy. However, I've used it in various projects with success. It does provide bulk and it can be worked in ways that are a bit different from cloth, so some people recommend it as the inner layer over an uneven surface.
If you are not familiar with epoxy and fiberglass work, take a sheet of plastic on flat workbench and laminate an 8x11" sandwich of 3-4 layers of both cloth and mat. That will give you a feel for how the material works, and if you made any mistakes and the epoxy cures too fast or not at all, you can discard the attempt. If you are successful on the first try, keep the result and you will find some use for it later. (For example, I had a hull puncture in my single hull where using a backing plate of about that dimension was the thing to do, but you could also cut strips off of it - there are many uses for this).
I agree with the cashless guy that this looks too big and too low to be left unrepaired. However, once you've got it watertight you could use it, while epoxy doesn't like UV, it can handle a few days in the open if you rather try out the boat before fairing, sanding and painting.
For sanding, first I would try to minimize the need for it, by using a stiff plastic backing sheet to make the repair conform to the hull curve. Second, I would use QuickFair or similar epoxy based fairing compound to fill any low spots. FInally, for painting, Pettit EasyPoxy is a single component paint that I found easy to work. It takes a while to get fully hard, but it's pretty tough (despite the name, there's no epoxy in it).
That said, you could attempt to patch the gelcoat, instead of having a small spot that's painted. People sell gelcoat repair kits. I do like the ones that are pre-tinted for various shades of motorboat hulls. If you can guess which one matches the DS, then you just mix in the required number of drops of catalyst, spread it over the repair and use a plastic backing sheet to both make it conform to the hull and to exclude oxygen (else the gelcoat will remain sticky). You would need to leave your fiberglass repair a bit hollow so the gelcoat can be built to a resonable thickness, and you'd need to be sure the epoxy is correctly mixed and any amine blush removed with soapy water (scuff sanding the surface also helps). Gelcoat will bond to epoxy (despite what you read) but not if the epoxy is not mixed well or not in the correct proportion or has amine blush.