[Marshall V. Daut]

Because of those wear divots in the teeth, you will never be able to adjust out the slop between the sector gear and the worm gear. Usually I see wear like this in steering boxes that had chassis grease in them instead of a thick gooey lube, such as 600w, STP or a dedicated steering lube like Penrite. Your gear appears to have some kind of gooey lube on it, but what was inside the steering box? If you find chassis grease, there's your smoking gun and why the teeth are so badly grooved.
Because the sector teeth are so drastically worn, you can bet that their partner, the worm gear, is also worn. It's difficult to gauge a worn worm gear because there are usually no obvious signs of wear. Do the job right and only once; replace both gears. And because both gears will be installed, you'll need to perform that mysterious 4th adjustment explained in the service bulletins. It can only be performed with the steering column out of the car, which is why it is seldom done. Initialize the 4th adjustment procedure by orienting the rivet's slot in a straight up and down position. Adjust from there.
Marshall