[cmjones01]

It's a bit difficult to know what to suggest without knowing more about the deck and making some measurements with a test tape. If it has a mechanical record/replay switch (unlikely in a deck of this type and era) that would be the first thing to clean and check. Extreme head wear is still a possibility - can you feel wear ridges on it with a fingernail? As knobtwiddler suggested, check that the head is moving in to the correct position. This might be as simple as recording a tape on this deck and playing it on another one - does it record OK? If so, then the head is likely to be in the right place. A head alignment gauge would determine this for certain but that'd a rather specialised tool.

As for electronic faults, all sorts of things could be wrong. There are often quite low-value electrolytic capacitors in the head preamplifier which could have dried up. Also possible is that someone has fiddled with the playback gain adjustments inside. Actually there's another thing to test: you say the sound is crisp and clear. Do Dolby-encoded tapes play back properly, or do they sound dull and muddy? If the gain was low in the early stages of the playback amplifier, Dolby decoding would be affected badly. If not then the fault could be later, probably in the output amplifier (which also usually drives the meters in a deck like this). We'd need to look at a circuit diagram to be sure.