The oil level does not cover the gears. There is a plug behind the brake rod on the LH side of the transmission housing that is the oil level. Fill until it comes out at that opening. It takes 5 quarts of 80-90W oil. The gears and bearings are lubed as the gears sling the oil up and into channels in the housing. That oil runs down and lubes the bearings. If you are just using the tractor for show and don't plan on hard work, I'd just clean the gears up and rinse out the housing with solvent, put in new oil and you should be good to go. The gear teeth are rounded on the ends from the factory to make it so they will go into mesh easier when changing gears. Of course there is some wear, but your transmission looks normal except for the rust.
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Today's Featured Article - An Old-Time Tractor Demonstration - by Kim Pratt. Sam was born in rural Kansas in 1926. His dad was a hard-working farmer and the children worked hard everyday to help ends meet. In the rural area he grew up in, the highlight of the week was Saturday when many people took a break from their work to go to town. It was on one such Saturday in the early 1940's when Sam was 16 years old that he ended up in Dennison, Kansas to watch a demonstration of a new tractor being put on by a local dealer. It was an Allis-Chalmers tractor dealership,
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