With sheet metal working there are no hard and fast rules. Guidelines for different methodologies are often conflicting/contrary to each other while both still being true.
As far as working the metal itself, for our purposes there's really only 2 practical operations. Bending and forging.
Bending is fairly self explanatory, but forging in this context could use some elaboration.
Forging is basically deforming metal under pressure. When you forge something 2 things happen simultaneously, you compress it beyond it's yeild point and it will begin to expand away from the forces put on it.
If you forge sheet steel compressing across it's short axis (hammer on the flat sides) it expands in the opposite direction stretching it's linear dimensions and thinning. The opposite is true too, although compressing sheet metal across it's long axis without simply bending it is exponentially more difficult.
So with that in mind, the goal for shrinking is to compress it along it's long axis. You're trying to squeeze the metal between the hammer and the dolly in a way that the force on the panel goes along the length.
In practice, if we're looking at a bump that need to be hammered flat you'll hold a dolly from underneath just outside of the area that needs to be forged down (or "shrunk") and hammer just past the apex of the bump on the opposite side of your dolly.
You'll need to swing the hammer in a glancing/circular motion so that the force moves at an angle towards the dolly along the long axis of the sheet.
Moving metal along the long axis like that takes a lot of force to keep the effected area localized enough to shrink it vs bending it down or just moving the panel as a whole. What I usually end up doing is working my excess metal into a narrower/taller section or multiple sections and then try to shrink it down. It's easiest for me to shrink if you're working across a 70-40-ish angle in the sheet between hammer/dolly. Too tall and it folds, too shallow and you just bend it and push the high spot around.
I prefer to shrink cold. When trying to move a lot of metal hot it is really easy to accidentally fold it over on itself. (It's not particularly difficult cold either) Also, when you heat metal you end up losing some thickness to oxidation/scale and can easily end up making the metal too thin over a few heats. This assumes you're just hot forging. Thermal shrinking is complicated and quite limited. Really only effective for minor adjustments on low crowns or removing small dents.
Hammer and dolly material are not important if you're working with this methodology. All I use are steel hammers. Working this way I'm not afraid of adjusting a panel as I weld it in. (Within reason.) Sometimes I'll actually tack in a patch in the corners then slowly work it down, shrinking/stretching between tack welds and adding tacks in the middle until I get a flush welded seam.
As far as the "2 operations" thing, there are a couple exceptions. Main one being the use of a mechanical stretcher. Also hammering into a gap like between the jaws of a partially open vise, a dolly with a hole, sandbag etc. However it takes very hard, very accurate swings otherwise you just bend and wrinkle the metal and is not really practical for someone without a LOT of hammer control.
Realistically, in this case, it might be easier to just cut an "X" across it, overlap and fold it flat-ish and run a cutting wheel across it again to get a good butt weld seam.
I know that's a lot of information, and I'm tired and probably need to come back and edit the hell out of this later to make it make sense.
