Look at the 3 arms on the chainset your chainrings are bolted on the inside of the 3 arms. They should be bolted on the outside of the 3 arms engaging on the visible shoulder. Compare the pictures.
You are right. But I personally I wouldn't touch it for the moment. There may be a good reason. For example he squished in a 5 speed hub, re-dished the wheel and wanted a more inboard crank to help the chainline. Does appear dangerously close to the chain stay.
Without the rear spacing dimensions we will not know.
@WhtANightmare - we may be loosing you a bit on technical waffle, but it's for the greater good
I think right now is a time to understand what you have, and don't lay in anything with a spanner. Time to look at details and just see if you can get a complete bike together with what you have found. Later a deep clean will require tools and understanding.
Going to say right now: This is a beauty. There's no stop-watch on you. Take it slow because it's antique really and needs respect.
For a newbie this is quite a challenge to say the least, but it's been done before.