Thanks for the pictures.
Very interesting.
Grandpa's ammunition was not that hot, which is good, because the 30-06 slamfire rounds I have seen were blown much lower in the case, indicating higher pressure.
As a case comes back, at some point the sidewall is unable to contain the pressure. The ones I handled looked almost cut, very precise on the location, no ragged, irregular edges.
Looks your case just blew out full diameter with no evidence of case rupture. That would indicate very low pressures.
A gunsmith can bend the operating rod to track properly.
I would get a CMP receiver and have the rifle built around that receiver. I would get a new stock.
http://www.thecmp.org/Sales/m1garand.htm
The receiver heel fits tighter to the stock heel section and it provides a gas barrier. If you notice there should be an air gap under the receiver ahead of the stock heel. This is a gas vent and protects the shooter in case of gas release in the action. Since your stock has a chip in that area, you really should just get a new tight fitting stock. Though someone could possibly fix the old, if there is no other damage. I would replace based on what I see.