A method I have used for wood that I intend to paint, unless you don't care if the repair is to be seen, is to completely cut out the damaged section. This will give you nice straight, smooth surfaces. Then cut a peice to fit into the area, glue it in and then shape it by cutting, planeing and/or sanding, or whatever method works best for you.
To reduce the amount of wood removed, on that particular piece you may just plane the current surface flat, glue a new piece to it and then shape it.
From the picture the hinge screws are what busted out the wood...plastic wood will never hold the screws and they need to go back in. So I say scratch the plastic wood idea all together. The best way would be to replace the entire piece, or at least like daryl said remove the damaged part and securely attach another in it's place.
Making the splint in the same line as the grain would hide it the best. However, what are you going to be able to see with the lid closed...very little. If the wood and color matches and you do a good job of orientating the grain, you should be able to hide the repair very well.
As Darin said, forget the plastic wood. You'll never get a good "hide" using that.
I agree that planing the damaged area flat is the best fix, if you can do that without affecting the structural integrity at the corner. I would then glue a matching, but slightly larger to allow for final planing to size, piece of similar wood. Just please don't try the filler thing. As an alternative if this is an heirloom piece...and I know this is sacrilege on a woodworking site where we all think we can do anything with wood, I know a guy who has a Furniture Medic franchise business & I've seen the restorative work they can do. There might be one in your area to check with.
In my opinion, wood filler is just like bondo. First, its plastic. Second, just like when you fill a dent on a car (or try to use it in place of the missing original material), if it is applied in more than a thin film, eventially it will fall off when you hit a bump. More embarrassing than satisfying.
Go with the repair as stated above. Its really quite easy and you will be proud of your accomplishment when your done.
If your nervous about trying, thats what we're here for.
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