That looks like it will be quite the project. To be honest, in the end, it may cost more than what it's worth. I'm sure it would be fun to restore to shooting condition though.
Krags used a single heat treatment process and as a result, cracks in the single locking lug on the bolt have been reported in several publications over the years. On the other hand, they have a glass smoth action and the calibre is certainly an effective deer load within reasonable ranges. In the event of a bolt sheering off, the base of the bolt handle provides a large safety lug.
I have no idea if your rifle was cut down from the infantry rifle or is from a carbine. Either way, I'm pretty sure that the front sight was brazed on with the original barrels. I'm not sure about the rear sight as the previous US rifle, the Trapdoor had it's rear sight screwed on with two headless screws. I can't check mine right now as I'm traveling, but that's what my memory is telling me. If that is in fact so, then the drilling and tapping at the front was done by whoever had the weapon before. The odd hole you mention was not on any US military rifle that I know of.
I have a Krag and keeping in mind paragraph two, I just shoot cast bullets out of it. With good bores, they are great fun and shoot quite well.
P.S. Have you figured out how to remove the bolt yet?