You can score the paint with a knife edge or screwdriver corner, then chip/dig the excess paint away, to free things up.
The thing below the knob, before it was painted in place, is the keyhole cover. It's supposed to swivel to the side. This is almost certainly a bit key lock with just a few levers; a good locksmith could get it all working again and give you an appropriate key if you want to maintain the history. For security you might want to mount a deadbolt higher on the door, with a modern cylinder and key.
If you want to replace this old mortise lock set, there are a few choices. It's going yo be hard but not impossible to fit a modern mortise lockset into the mortise cavity. Or you could fill the mortise by gluing in one or more appropriately sized blocks of wood, drill the repaired door, and mount a tubular-style knobset, which is the type most commonly used today, optionally mounting a deadbolt over it.
Or you could retire and replace this door.