Exterior water damage, need advice

[Fixxxer]

My wife and I have been in our current home (it was built in 1993) for about 2 years now. The other day, while cleaning out some of the gutters, I noticed some water damage on the side of our garage, on the eave where the rain gutter connects to the side of the house. It looks like a squirrel (or maybe a bird) has chewed up some of the trim/molding above the eave. I'm not sure if this is the source of the water damage below it or not... In any case, I need to get the water damaged boards repaired before the rainy season (I live in Raleigh, NC). I'd like to try and do it myself, since a repairman will probably charge a lot. I'm good with tools and DIY projects, so I don't doubt that I can do it - it's just that I've never attempted anything like this before, so I'm not sure where to begin...

Here are some pics I took of the damage:

http://farm1.static.flickr.com/141/3...e047b433_o.jpg

http://farm1.static.flickr.com/165/3...951caff7_o.jpg

http://farm1.static.flickr.com/147/3...8bd5659a_o.jpg

http://farm1.static.flickr.com/157/3...f4f09b84_o.jpg

As you can see in the pictures, one of the boards below where the gutter attaches to the house has rotted and begun to sag. In some of the pics, you can see where I poked a finger right through the board because it was so soft/brittle.

If I were to attempt to fix this myself, what exactly would I need to do? I'm assuming that I could just use a pry-bar and/or a saw to remove the old boards and replace them with new ones. Is this correct? Can anyone recommend a better way of going about it? Is there any particular type of wood that I need to use to replace the rotten pieces with (treated, etc.)? What about the joints where the replacement boards join the existing ones? Will those be sealed adequately with a new coat of paint, or will I need to apply some caulk as well? Am I forgetting anything?

Thanks for any and all help!

[HayZee518]

My Dad used a product called "penetrol" I don't even know if they make the stuff anymore, but applied to a surface, re-hydrated it so it wouldn't dry out. It would make punky wood resilient again. As far as boards that are definitely out to lunch, I would cut them out and replace them with another board. Prime both sides of it and nail in place. Rafters that are rotten on the ends, you could sister a rafter to the not so good rafter and nail the fascia board to this.