I posted the picture of the white one to show what I thought the bridge was like (the "saddle" as you call it) - which I can now see is the same as yours. What about my idea of turning the bar upside down so the string slots are on the underside? (it should actually be completely smooth with no slots at all - maybe the previous owner filed some slots in it for some reason - can't imagine the strings wearing slots into the bar on their own).
The good pickup would not necessarily reduce in volume with the blend control - as I remember, one of them stays on all the time and the blend control fades the other one in. In any case, it should definitely be a pot, not a switch.
It would originally have been a little wheel under the chrome bridge cover (you can see the hole where the shaft would have come up next to the bridge between the 3rd and 4th strings). It would have looked like the little thumb wheel you can see on this Stringmaster. In any case, I'd hold off on getting a replacement until you get the pickups replaced in case it is working.
Another thought - maybe the previous owner messed up the wiring when he re-located the blend control. Have you tested the "broken" pickup in isolation to see if it works after all - maybe it just isn't wired in to the circuit?
