I took the motor to a motor place. He told me to use NO lube; just clean everything. The spark at startup is normal for this particular motor. He told me to make sure it was up high so it didn't ignite any gas fumes.
So I got some contact cleaner and cleaned everything. I lightly sanded all the contacts. I cleaned the centrifugal mechanism really well and got all the gunk off. I also wiped the oil off.
I started it up and it sparked, but ran fine. I subsequently switched it on and off a few times and got a very small spark.
I can get a used motor on CL for about $50-60. I might look at one and see if I can get it to run and see if it also sparks before I buy it. However, after talking to the motor man, it seems this is normal for this motor and that it's nothing to worry about.
I have a drill press with a similar motor (probably much newer) that I can look and see if I get a spark at startup.