This appears to be a Gitane Tour de France, so that's probably a Nervor steerer which goes inside a generic seamed tubing head tube - Gitane allegedly skimped on using 531 head tubes. I would be pondering either (a) having it replaced with a British/ISO steerer and changing the headset or (b) just running a brake cylinder hone down the inside of the steerer to smooth it up and clean out any corrosion, then fitting a Nitto Technomic with a long quill in there, so that the clamping force was well below the damaged area. Or is that an exceptionally bad idea?