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Should I attempt to remove the section of glass by sanding or cutting it out and what's the correct method to reapply the new glass?
Ted Moores' CanoeCraft will show how to make repairs and apply fiberglass, although it's fairly straightforward.... if the fiberglass sheath has detached from the cedar or is damaged, any loose glass should be cut and sanded away, then a fiberglass patch applied over top, overlapping with the old glass by a half inch or more. You might have to cut out some wood as well, the way to go about this is shown in the book. Apply marine varnish over bare fiberglass to protect from UV damage.
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Also, should I prep the wood with any type of chemical to help preserve it?
No way, it might affect the bonding and curing when the glass and epoxy is laid on... maintaining the canoe so that it's watertight is the best way to ensure that the wood stays in good shape.
Cedarstrip maintenance isn't difficult, temporary repairs can be made when the damage occurs and a more permanent fix done during winter. Keeping some fiberglass and epoxy on hand to make the repairs when necessary will help... good luck!