John E is right, at least I think so. There is not a derailleur hanger on the dropout and something has been ground off. Other less than steller news, after striping the bike down I discovered that that paint is not original. It was a purple/pink pattern originally.

So now... Can I use the same or a slightly modified version of the hanger that was created and still have a functional bike? Actually, the derailluer worked just fine, I set the bike in a stand and cranked through gears. The chain has no rust and seems to be okay.

Second question (today anyway). I couldn't find a link that was easily breakable. Should I just use a chain tool to remove the chain? It's got to come off sometime..

Now I am going to paint. Actually, I have a friend with a media blaster which is a good start and he also has access to a powder coating booth so technically I wont be the one painting.

This is going to be a nice looking rider before the end of winter.