The rear sight appears to be a Lyman #1 cocking piece sight which was intended to fit on the rear of the bolt of rifles such as the Mannlicher-Schoenauer, Springfield, Moisin-Nagant, etc. While they weren't expensive at all at the time this carbine was built, they sell for big bucks today -- minimum of $125-150 in good shape and well over $200 depending on which rifle they are for. The peep sight would give excellent precision capability to the shooter -- much better than a square notch rear for longer range shooting. Someone was really serious about this Luger project -- man, would I love to get my grubby paws on this one!!
Thanks for posting the very interesting information and photos!!
John