Ironically the design of the 2 prong drive is supposed to be a thread protector!
Although it does look as though the back portion is the spindle lock, and separate from the 2 prong drive, I would be inclined to take of covers to treble check there is no other spindle lock.
I would then dremmel out some of the damage to the tommy bar hole, enough for a drill bit to bite cleanly and drill a bigger diameter to match the ends of the damage BUT being sure whatever drill you use you have a perfectly fitting bar for the new enlarged hole, probably no need to go deeper than the original just true it up. All the planning and execution time should be filled with a liberal daily dose of your choice of corrosion buster, I also would recommend Plus Gas, but whatever you have is the one to use.
Most importantly go for longer bar for extra leverage and stop hitting it! I have a suspicion that unlike most modern (under 100 years old) lathes this one may not have a Morse Taper, and you may find you need this tool.
Hard to say from the photo, but I suspect this lathe spindle in an oddity and doesn't have a Morse Tapper