It is most likely for a followspot arc lamp...it could also have been for a pair of film projectors (not too likely in a school, but things were different back then.) I did notice the generator is rated at 72 amps so that favors a followspot instead of projectors. Can you trace where that cut-off feeder goes? You'll find clues as to what it powered at the other end.
As for the oil, because of its age I would say it is most likely mineral oil but it could be pcb contaminated, it would have to be tested to be sure. In any event don't just dump it out!!
As a rough rule, I seem to recall being told that if it's mineral oil it will smell like regular cooking oil or rank if it's gone rancid, and if it has pcb's it has a definite petroleum/chemical smell.
Finally, with a bit of cleaning and some fresh bearing oil, that M/G set will still run like new. I dare any modern motor to last 1/2 as long as this good old stuff.
