I couldn't make this up. My jaw just hit the floor when it was explained to me the first time. I still shake my head typing it up to post here.
What tool should have been used to do that conversion (in reverse)? To their credit, it sounds like they solved the problem and moved on.
They, as you, decided it was acceptable to do whatever needed to be done at whatever expense rather than taking 10 minutes to find the proper workflow which would have saved them money. A simple phone call to the company they used to transfer the film to video would have been able to explain to them how to do this in less than 5 minutes. I know because I worked for the company doing the film transfer and had helped several other clients with the video for film post workflows. Today, it's even easier because there's like a bazillion write ups on how to do this posted on the web.
Edit: I didn't answer the question directly after pontificating. IVTC is the process that needed to be applied. Many many tools exist(ed) for this. The tools at this company's disposal would have been After Effects, Avid, etc. Later more tools became available like AVISynth, FFMPEG, and other dedicated tools were created by people to tackle this directly.
Supposedly the original newsreals still exist, preserved by the National Film Registry: https://en.wikipedia.org/wiki/Hindenburg_disaster_newsreel_f...