I've just got a 1966 Fender Mustang.

The body in Dakota Red is in poor condition.

Should I have it refinished or leave it as it is - in its relic condition.

Also if I don't have it refinished, is it possible to cover the bare wood with a matching or similar colour or would it be best to leave it as it is

I would leave it!!! I love old basses with character, but I can't bare to do the damage myself :D

I would leave the dings the natural color, you could spray a clear coat over the whole bass (remove all the hardware first) to protect the wood.

If you try to color match the red, it probably won't and it will then look worse...

Darrin

That's not too much damage. I think it looks cool. I agree with Darrin, I'd leave it alone.
I know these basses arent' worth a lot, but I still would leave it original. You never know what might happen to the market for these in 10-20 years.
I know a couple guys that did the "natural" finish thing to their mid 60's Jazz basses and they are really crying the blues! An original finish, no matter what the condition, will always fetch more than a refinished or touched up instrument.
Just my $.02.

best to leave as is, i think it looks cool!
plus the resale value will be much higher if you ever plan to sell.