I was using a DA, I did not even think it was possible to do this with a DA. I was using Meguiar's 105 with a Rupes green pad. I was not even pressing down that hard, however, I did keep it in one spot too long.
First off, sorry this happened to your mustang. Mustangs are near and dear to me as I have long list of Mustangs that I've owned and let go of, but have my favorite one sitting in the garage as I type, my garage queen.
I don't jump on the forum much these days, but felt compelled to jump on this one as I think we've all at some point made a few mistakes in our detailing endeavors and that makes us human.
To dispel the myth that DA's don't burn through clear coat. Well, they certainly can, as you can see first hand.
Mike has many posts on this subject and covers it in his book, and coming from experience, yes you can burn clear with a DA. Like Mike, I too have many posts on this forum that advise folks to not "chase" after one or two scratches. Clear coat is thin and in that section of your Mustang, right on that wheel well body line, it's especially thin.
Several things end up happening when one decides to chase after a scratch. One, if regular section passes didn't take it out completely, it's probably pretty deep to begin with. Section passes are designed to spread product, work an area but do so in a way that you dissipate heat. Second, when that doesn't work, some will opt to change pads to a smaller pad and heavier compound. Thirdly, folks get tunnel vision on getting that darn scratch out.
When all three things occur, some physics are at play, and physics and science always win. The smaller pad, the more heat it generates. Staying in one spot generates heat. Tunnel vision on remaining on that scratch generates heat. It wasn't the polish or the DA that burned the clear, it was heat build up. Eventually, the heat build up "burns" the clear-coat. Especially on a body line, as it appears to be where you burned through.
This is a really good lesson to learn, sadly on your Mustang and not an old beat up daily driver... Luckily I learned this lesson on the latter... a really old Acura that had about 200K miles on it with more check engine lights on the dash board than a Christmas Tree. Despite best efforts, the vehicle couldn't pass state inspection and eventually it ended up in the big recycle bin. It was a good car to practice and learn about burning clear coat.
And here is a lesson for beginners that have Honda's or Acura's or vehicles with off-color paint schemes, like "ruby red" etc.. A lot of Honda's use "tint coat" to change the original paint layer scheme. Tint coats are also easy to burn through... (again, a little experience on that one too.... hehehe)
We're human, we all make mistakes... The great thing, these mistakes are all fixable. No one got hurt
As far as repair, if they have to bleed the paint it will be more than $250.00, but then again, I'm not a body guy so I don't know. My guess is somewhere between $500 - $1000 range, but then again, that varies by region and quality.. Personally, I hate blend lines... So read Mike's article. I'd rather have an entire panel repainted... I've worked on bleed jobs before... And my personal preference is to keep as much factory paint as possible.
Worse case scenario is, gather your quotes and sit on them for a while and decide. Aside from an ugly mark (that perhaps only you will notice) sometimes it's nice to leave the little blemishes so you remember the next time you decide to chase down a scratch. In this time when cash is king, if it were me, I'd leave it.
Hope this helps!