Hi Fayeknit,
Is the machine clean and oiled? Wipe off all the metal parts and vacuum the slots in the needle bed - it is surprising how much fluff builds up inside the machine over the years. Put a couple of drops of machine oil on a cloth and wipe along the front and back of the needle bed and along the needle butts. Brush the underside of the carriage and lightly oil the metal parts with your oiled cloth.
Do you have the instruction manual? It will give you an idea of the tension settings for the yarn you are using. Usually the problems you describe are caused by too much tension on the upper tension unit - try loosening it. Also try a looser stitch size (higher number on the carriage tension dial).
The damaged brush may well be causing problems, try removing it - they are usually attached with small cross headed screws. There are sometimes brush wheels on ebay.
This is a very old machine and I am not sure which type of needle retaining bar it has but if it is one with a strip of foam, the foam might need replacing. The thickness of foam determines the pressure on the needles and keeps them in the right position for knitting properly.
I hope this gives you a few pointers to help you get the machine working smoothly.
Kind regards,
Sue
October 2012