Yes, the space between the engine and the transmission is supposed to be dry. Your main clutch and your PTO clutch are both in there, and they are both dry clutches. With the age of the tractor, the seals are probably worn and hard, and let some oil seep into the compartment. This usually happens near the PTO clutch pack, as it is low and closer to the transmission. As long as the oil doesn't get into the clutches, it's ok. But as soon as they get oily, they'll start slipping. Repair of the seals requires splitting the tractor and removal of the PTO clutch. Parts are available, but replacing all the discs in the PTO clutch can get a little pricey, so replacing the seals is a good idea.