What you're describing sound like a lot of old machines. All the pivot points, pins and linkages are worn so there's a lot of slack in things. Not a big problem as long as it still snaps in when you pull the clutch and the transmission stays locked into gear as long as the clutch is engaged (pulled back).
Is yours slipping? Does it still snap in once it gets hot? Might need to adjust it slightly tighter to account for the change when it gets hot.
Sounds like you have one of the BeeGee pumps or similar mounted on the front of the tractor and the resevoir for the hydraulic oil up on the fender. There should be no communication between that oil and any other oil or dry compartment on the tractor.
However, your clutch may be running in oil which seeped out the rear main bearing of the engine if you haven't drained the clutch compartment in a while. Sometimes you will find that someone has drilled a hole in the drain plug and put a cotter pin in it to rattle around and keep the hole clear so any oil that gets in the clutch compartment can drain away continuously. The oil cup on the clutch release bearing puts oil in to the compartment and also, the rear main bearing on that tractor did not have a seal, instead there is a thread cut on the crankshaft that works any oil that goes that way back into the engine. As the bearing wears, this simple system becomes less effective. The clutch has slingers on it to keep the oil from contaminating the dry clutch linings, but once oil fills the compartment up too high, it will get on everything in there and should be washed away with kerosene or diesel fuel etc by putting a small amount in the compartment and running the engine a bit to splash it around before draining it out.
D2-5J's, D6-9U's, D318 and D333 power units, 12E-99E grader, 922B & 944A wheel loaders, D330C generator set, DW20 water tanker and a bunch of Jersey cows to take care of in my spare time😄