in my experiences, that tank will casue the compressor to run constantly. the other bad thing about this is that you will also have to wait for the air pressure to build up ALL THE TIME. my buddy has a 30 gallon 5 hp craftsman compressor. it works only for small stuff. grinding takes too much air. painting is the same way. you can get some small stuff painted, but nothing bigger than maybe a door, without waiting for the compressor to catch up.
for the money, that compressor is a good deal. just remember that it will not do everything needed for bodywork. you will get frustrated.
good bodywork tools include: angle die grinder, DA sander (get a palm DA if you can find one. much more comfy than a regular DA), 5" grinder, cut off wheel (get the weld grinding discs for quick grinding of welds, regular cut off discs for cutting), an air file (straight line sander) will help you out with large flat panels, but will also make your hands numb, making you loose feeling in it to determine if the panel is straight.
any other questions, let me know. i am an ASE bodyman.