Perhaps someone ground off the sear in an attempt to reduce the trigger pull... but my guess is that it would be dangerous to shoot that way!  Am I correct in assuming that it has a banded front sight?  I would guess that if it does, it has a cut down barrel too, which is another in a long line of problems.  I agree with Dick (you can take anything Dick says to the bank!)... it's not worth trying to restore this to shootable condition. 

Decent Krag rifles in all their full original military glory can be had for anywhere from $1,000 and upwards.  Good shootable sporters can be found for significantly less (usually under $500).  A Krag is one of the greatest rifles ever made, with the slickest bolt of any rifle ever designed!  Once you have one, you'll want more...