poggor - When you say it is a 1” post is that then marked as a 25.4 mm? I know French frames used smaller than the 27.2 standard seatposts but you might want to search some for the correct size for your Peugeot. It must be in the 26.** mm range. That slot closing up, the bolt fully tightened and the side to side movement are all clues that you have correctly identified as not OK.

Continuing to run it as-is, even though it isn’t slipping down is not advised as you probably anticipated folks wold say. With my luck, if it were my bike set up like that, I would hit a bump and it would slide down 2” gouging itself all the way down, then the seatpost bolt would snap off and leave half of the broken bolt stuck in the frame. There were some nice 26.4 and 26.6mm Shimano Deore XT seatposts sold through eBay and a vintage parts guy in Colorado, but first - knowing the correct size.