Hub bearing race and freewheel woes.
I wanted to fix up an old Pashley bike with rod brakes that I came across. The back wheel was rotating at an angle so I took the axle out to find 8 bearings on one side and only 6 on the freewheel side!! Instead of a simple clean and fit new bearings, the hub cup on FW side had this weird protrusion of what I can only describe as rock solid metallic like gunk! What on earth is this? 
Looking at the other 180° of the race appears normal just filthy but I wanted to remove the freewheel to inspect further... however one of the removal tool notches is already sheared off as shown and some bright spark has then turned to the locking but instead of tapping it clockwise to undo, they must have tightened it further from the looks of one of those lockring holes!!
Depsite my best efforts with a hammer and punch, the lockring will not turn so I have no idea how to remove this FW either!
1. How do I get the FW off? (I don't have any grinding tools)
2. Any idea what that substance in the bearing cup is?

Looking at the other 180° of the race appears normal just filthy but I wanted to remove the freewheel to inspect further... however one of the removal tool notches is already sheared off as shown and some bright spark has then turned to the locking but instead of tapping it clockwise to undo, they must have tightened it further from the looks of one of those lockring holes!!

Depsite my best efforts with a hammer and punch, the lockring will not turn so I have no idea how to remove this FW either!
1. How do I get the FW off? (I don't have any grinding tools)
2. Any idea what that substance in the bearing cup is?
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Posts
Sheldon Brown may give you some more clues, but I think this freewheel is from before his time.
I wonder if it's possible with a Dremel to make another two notches... alternatively, build a new wheel, looks like that hub has seen better day
OP possibly drill two holes in the top of the freewheel, hammer in pins, clamp up the pins in a vice and turn using the wheel for extra leverage. It will either come off OR will get torn apart and come off. Either way it will be off.
Also Ugo is also right, there isn't much point using a knackered hub, buy a new old one off the bay and rebuild (assuming the rim is good etc etc)
Nice project btw.