That frame is worth saving, early sixties Schwinn twin bar, so I would take my time and do it the tedious way. It looks like that stem is jammed in and won't turn or budge at all. If it won't come out, I would try different ways to get it free. Put the stem in a vise and try to turn the frame to loosen it. If that fails, drill a hole horizontally through the stem, slide an old screwdriver or similar bolt and tap and hammer it upward. It looks like it was hammered in, so maybe the opposite will free it. If that fails, get a 2 foot long steel rod, 3/8ths inch or so thickness. Drill a hole just big enough in the bottom bracket (away from the weld seam at the bottom, but where the rod will slide into the seat tube and contact the stuck stem.) You can plug the hole in the bottom bracket later. Hammer the steel rod on the bottom of the stem and that should knock it out.
Once the stem is out, the damaged portion of the seat tube can be fixed by gently tapping the bent portions with a mallet. The right stem (13/16" is the old Schwinn size) can be set in and used as a guide to put the bent portions back into shape. I've done that a few times with frames that were beat up like that. Just take your time. Then when the collar goes on, it won't even be noticeable.