Yeah, welding up a seam like that can be tricky. The heat of the weld will definitely distort the metal, no matter how careful you are, but you also need enough heat to melt the rod deep enough into the seam so when you grind it away, there is enough material left behind to keep it strong.
Sometimes, If I can access the backside of the seam, I will fully weld it from both sides so when the face is ground and sanded smooth, there is no question that it will be strong.
Check out this link. It's a fender mod thread that I did a few years ago. The rear fenders were welded from the front and the back so I could grind it to a nice smooth radius.
http://www.ttora.com/forum/showthread.php?t=164292