You have the original style PTO. It was replaced for a short time with a second design and then quickly changed again to the standard 1 3/8 shaft will a spline type engagement on the transmission countershaft. The spring is there so you can engage the PTO even if the dogs are not lined up. As you start to release the clutch the spring will push the dogs into the slot on the countershaft.
You can weld up the dogs to get a good square surface again and it may work for you for a while. My dad used to do that once or twice a year since that was the tractor he liked to use to run the corn picker.
For a more permanent repair you are going to have to remove the transmission countershaft and repair the worn end. Unless you really want to keep it original you are much better off replacing the countershaft with the later style and using the newer PTO shaft. If you do change to the 1 3/8 shaft you should also change the swinging draw bar since it was made longer to keep the correct distance for the longer shaft.
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