Appears that an impact or pressure from behind or under the dropout caused the issue which may not be as simple a fix as it would seem as the adjuster screw introduces a little extra dynamic to the problem.

One should be able to cold set the dropout back to it's normal width so it will accept the axle but there is a risk the dropout might crack and the most likely place for this would be at the adjuster and one would want to inspect the area closely for any cracks that may form.

One never knows how the steel will respond... if the dropout got cooked during the initial build it could be more brittle and prone to cracking and one would want to isolate the area you are working on as much as possible to ensure stresses are not transmitted into the joints at the stays.

I'd also check the frame alignment just to make sure the impact did not affect this.