Those pics are very useful, Sarah! Yes, it's on old-type clamshell mechanism, as shown by the split line down the middle of the underside. The large oblong is, as you thought, a magnet - it it stuck on there to trigger certain things that can be installed as track contacts, where a reed switch operates when the magnet-equipped loco runs over it. They are commonly used to operate signals, point motors and the like on analogue (DC) layouts.
The mention of a PCB - Printed Circuit Board - in this context just means if the loco has a board of electronics inside it, usually in the boiler in the case of a Stainz, which carries things like the diodes (and sometimes a voltage regulator) for the directional lighting and also the plug connections for motor, power, smoke (if fitted), lights etc. I strongly suspect that given the age of the loco, it won't actually have a circuit board - just a very basic wiring loom to connect the lights to the track power.
As I mentioned in an earlier post, if you want new skates (which wouldn't be a bad idea, those ARE rather well-worn as you'd already said!) then you will have to make sure that they are the old type, not the current production ones which will not fit.
The previous owner, or whoever installed the DCC decoder, will have had to do some re-wiring of the motor block in order to make the old clamshell gearbox DCC-compatible, as "DCC-ready" gearboxes didn't come in till the late 1990s.
Taking a Stainz apart is not difficult, once you know what you are doing! There are a few little traps for the inexperienced, but lots of folks on here have done them and between us we can probably talk you through it when you're ready to try. For the moment, I would definitely suggest just testing the loco with power to the skates before you go any further. Also, have a careful look at both sides of the Decoder circuit board, do any of the components look discoloured or melted? Does the board have any lingering smell of burnt components? I strongly suspect that if it runs one way and not the other, then the decoder's driving stage is damaged as an earlier poster suggested.
Jon.