I will try to help with a couple of thoughts and observations, but I will absolutely defer to, and you should totally ignore what I say if it's contradicted by, anything said by our resident expert plumbers.
Thought 1: You say the toilet won't sit level on the floor with the edge of the flange flared up like that. Remember that the toilet doesn't sit on the flange. It sits on the floor outside of the flange and the outflow spigot from the toilet will be raised up a bit from the floor level when the toilets outer parts sit on the floor. Particularly with this flange more or less level with the floor, the toilet shouldn't be touching it at all. (Technically, the flange should sit on top of the finished floor and be anchored to the subfloor, so you are going to have at least a half-inch of protrusion of the flange above the floor level. That said, flanges level with the floor are not uncommon, due to how the plumbing and tiling trades interact on a construction site.) That protrusion upwards shouldn't affect anything, except perhaps the angle of the bolts as you mention. (It is a good example of why we like flanges with stainless steel rings rather than just plastic.) Try dry-fitting the toilet above the flange without the closet bolts installed. Does it sit level? If it rocks, the floor is probably a little unlevel, and you can shim it so it doesn't rock with plastic window shims, available at any hardware store or HD. Terry's son, in his excellent guide on installing a 2-piece Toto toilet, says that they like to shim from the rear, pinning the toilet forward a bit. Once you see how you will need to shim it, you should be set.
Thought 2: The damage to this flange, while not extensive, does appear to be the reason your bolts would angle in when tightened. I'm thinking that if you double-nut the closet bolts, as the better plumbers do, this may solve your problem. Double-nutting means that you put the T portion of the bolt in the slot, then use one washer and one nut to secure it in place. The washer on the top of the flange may help compress the bolt in the slot so it sits straighter. It doesn't have to be perfectly-vertical. It just has to hold the toilet to the floor. Then, when you position the toilet, you use a second washer and nut to secure the toilet to the bolt that you have secured to the flange. Here's the kind of closet bolt set you want -- two washers and two nuts for each bolt. You don't have to buy a set this expensive, but I just wanted you to see what the set would look like. Lasco 04-3637 Closet Bolts
Thought 3: A repair ring would also probably do it for you, but I don't see that it's absolutely-necessary. You would secure it and it would press down on the existing flange and maybe push that lip a bit back into place so it would be more or less level. However, the flange doesn't have to be absolutely-level, because you aren't attaching any part of the toilet to the surface of the flange. There will be a gap between the top of the flange and any part of the toilet. Your wax ring is going to sit on the flange and fill the gap, and when you smush the toilet down on the wax, it will smush a little more out of the way on one side than the other. The toilet's level will be determined by its position on the floor, not the flange. In other words, the wax in the seal will be a little deeper on one side than the other, which makes no difference whatsoever.
Thought 4: You probably need either an extra-thick wax ring or two regular wax rings (either two with no plastic funnel insert in them or one with and one without; never two stacked funnels. If you have one with a funnel, it goes on top. And you always put the wax down on the floor then carefully set the toilet on top, then smush it straight down with no rocking, regardless of what the instructions for the toilet say. That's how the better plumbers do it.) This is what we recommend when the top of the flange is level with the floor or below the finished floor.
Come back with any other questions.