Sounds like very good news.

If you haven't already (sounds like you have?), I'd suggest pulling off the fork completely and inspecting the steer tube for bulging or distortion. Out of roundness is not the whole story.

FWIW, I didn't think to check the stem yet, but I got blindsided a few weeks ago by a road grinding operation that left a 3" square ledge going perpendicular to the travel direction that was not marked and was obscured by parallel tree shadows when I encountered it on my ride home after riding the same route in the morning prior to the grinding operation. Of course, the discontinuity was at the bottom of a hill so I was going about 25mph when I struck it. Both wheels were knocked out of position but fortunately no taco or blowout, however, there was immediately a lot of brake drag from the out of position wheels so I ground to a stop and checked the damage. The rear wheel was intact, and just needed to be put back in proper alignment. The front wheel was warped axially, but fortunately only a little, and I was able to gain sufficient brake clearance by opening the brake cam, and re-aligning the wheel, thus able to continue my ride home. However, I immediately noticed, riding on the drops, as is my wont, that the handlebar had assumed a new, deeper shape, and narrower at the drops into the bargain. Did I mention I ride the drops? That was my configuration when I struck the discontinuity. So a large percentage of my mass was shock loaded onto the drops on the impact. Now I need to check the stem.
BTW, the front rim, on inspection, is toast. It has a nice radial divot of 2-3mm rendering the 2-3 spokes in the area ridiculously loose. I will rebuild the wheel with a new rim. I'm amazed I didn't get a pinch flat (700c x 25 tire/tube).

Boy, howdy! What an unpleasant surprise that bump must have been

As mentioned above, could be as anti-seize, OR

I've used it when the threads are buggered and won't hold the top cap. I've heard foil works even better in the application - haven't had a chance to try it.

Can hope that it's nothiing significant. If you lube and adjust the headset properly and stick a straight stem in there, snug it up, and rotate the fork around (no cables to interfere) and check if there is any wobble in the stem or does it rotate true with respect to the head tube. Should be able to see, also, if the fork is rotating around the head tube properly. If there is a problem with the steerer being bent with respect to the fork crown, you'd think that it would show up as inconsistent rotational drag as you rotate the fork in the headtube.

You should be able to inspect the steerer threads visually and by threading the upper crown race back and forth and see if there is anything goofy with the way it threads and unthreads. Should be able to see if the threads are buggered, I'd think.

My wag is that the bike was in the garage and somebocy bumped a car into it. Wouldn't take much of a bang to bend the bars and with the stem being grossly under-inserted, my wag is that it's unlikely that the headtube suffered any damage. But, if you find some fault with the fork/steerer and consult with the frame builder, perhaps the frame can be given a quick check for alignment -- something that is not easy for us mere users to asses but which a frame builder should be able to determine.

Why the teflon tape? Probably to prevent leaks.

I think the bike may have spent time as a trainer after the damage, the head set was loose, so maybe some one thought better than to crank the headset down tight with the damaged stem and put the tape in to hold it together since the nut and lock nut where not in contact.

You got that right

Got a chance to poke around the bike a bit more and 3 out of 4 cantilever studs are spinning. So the bike will be visiting a frame builder, and not on the road this summer. One other interesting thing that I picked up on is the rear Mailiard hub is spaced at 124mm. Thats a French thing right?

6 speed? Could be someone just added a couple spacers to a 120mm OLD so they could go from 5 to 6. What is the rear frame spacing?

Not that unusual for French 5 speed spacing to be a bit over 120. 123 or so is more typical though. A lot of bike boom bikes are not super precise. As long as it rolled and worked, it didn't matter.

5 speed. The bike is tucked away 3 bikes deep, so I'm not sure of the frame spacing. The bike is supposably an 80's vintage custom jobbie.