I've tried it both ways.
If there's no evidence of water problems with the siding/housewrap/drainage right now other than this one little spot, in your place I'd chop and fill the rot with the epoxy stuff. Might use cheaper bondo too if I were planning any bigger renovations soon.
I found when I pulled the boards off, I ended up making bigger problems with the house wrap and drainage plane than I had before, which then had me pulling siding to address the worse issue I had caused.... and .... you know how it goes.
If it jams, force it. If it breaks, it needed replacing anyway!