Do you know if this bike was in an accident? It almost looks like it took a pretty good hit on the drive side. Is the frame straight? I notice that you have horizontal dropouts. I guess that kind of scratching on the chainstays could happen if the wheel was loose or really crooked. But I have a hard time imagining how the bike would have been ride-able that way at all.
I'm assuming the tooth on the small cog was broken already when you bought the bike?