I would guess the up and down blade play would be very difficult to fix without machining a new part.
The spotting is probably not a problem. The blades on most Old Timer knives are carbon steel, and that's what carbon steel does over time or if exposed to acidic fluids.
The grit, rust, and dirt should be easy to clean out. Hot running water, dish soap, and a few q-tips. Add a couple drops of oil into the joint after cleaning and a light coat of oil on the blade.
Personally, if the knife is too loose to use safely, I'd clean it and set it aside as an heirloom.
Good Luck.