As already stated, the hole in the end of the contact arm is where the contact button used to be connected to the arm.
I have also seen the wound wires worn through, and this makes it where if the gauge reads at all it only reads the (upper range or lower range) can't remember which.
The problem with trying to fix that arm by attaching another button to the end of it is that if you heat that arm (solder the button on) the arm looses it's spring ability, and you will have the same problems but for a different reason.
Then in contrast, somehow otherwise attaching the button messes with the ohms and causes a wrong reading.
(like if you glued it on with something that has continuity, but not enough)
Then there's the whole fuel eating some materials thing to consider also, so by the time you get through trying to solve all of these issue's you are far ahead by replacing the sender anyway. (even with it's own can of worms being involved)
It sucks I know, and every time we replace a sender unit it never seems to work quite right again.
I attribute this to sloppy quality control in manufacturing, because even senders with advertised correct ohm readings seems to have some problem or another in it's range when used with the older gauges. (I'm sure some worked right the first try, but it's rather rare in my own experience.)