The discussion of the Mauser side plate interior s/n transition in 1937 is in FAQ #24 of Ed Tinker's New Collectors forum FAQ posting...
http://forum.lugerforum.com/showthread.php?t=13121
It indicates that in an early 1937 Mauser, the first two digits of the serial number (instead of first two digits +1 found on later Mausers) would be correct.
Seeing some rust inside the back of the receiver, I wonder if there was once more surface rust on this Luger, and someone took steel wool and Naval Jelly to it to try and remove it... That would efficiently remove the bluing too.
Marc