I take it the " rod " is what we call a " shaft "
For sure, the OP took the shaft on this one. Of the hardest sort.
No way would I put $7500 into this, especially with a very good chance of more potential issues. But I'm cheap.
A few thoughts:
-- Part it out and sell it on ebay and elsewhere. It will take time but you'll probably do okay - depending on condition and other wear. Maybe even come out ahead, not counting your time. Though you'll be constantly reminded of it, which could get old quick.
-- Sell it as is, damage noted.
-- Figure out what ratios can work and clean it out and run it on a vfd. Maybe you'll even have more than one gear available. It would improve resale value. If I had bought one of these machines in good condition, the first thing I would do is put a good vfd on it to avoid changing gears.
-- Find a toppled donor machine. But do check the thing out before buying. I have seen sellers bust knobs or levers on machines to hide serious internal issues. They try and get buyers to believe it just needs a simple repair.
-- Repair it. I think this is only viable if your machine is otherwise a really spectacular example, with minimal spindle and bed wear confirmed. You haven't described it, so we don't know.
The manual page the OP posted lacks the hand written note in my version. It says the bushings inside those gears are #311-1562 and three are required. I think I'm looking at the same manual and model but can't be sure. There are also warnings about not scratching the shaft with the circlips, under penalty of serious grief.
Has the OP passed a magnet through the box to see how much metal has been going through the gears? Is there an oil filter? Is it likely the pump delivered contaminated oil to the bearings? Is the oil pump trashed?
I ultimately passed on two of these lathes, 13x40, at auction from a vocational school. Before bidding I checked ebay for parts (crazy prices confirmed) and contacted Clausing in Kalamazoo to check on availability and cost. The machines had minimal wear but after careful inspection I thought one had a feed problem. They sold for $1750 and $2200, with no one else doing any inspection beyond wiggling knobs. Nice machines, with a compact footprint. Just did not need it.
It would be interesting to see more photos of the machine as sold, in regard to general condition. I'd like to hear the story of the specific auction, and auctioneer, where this trashed machine was sold.