The machine originally had a stepper drive. Unfortunately someone removed it but what is done is done. He did leave you the hubs for the drive which I guess has been modified to a coupler. On my lathe conversion (Dyna DM3000) I installed a toothed pulley on that hub and created a belt drive.
The wire from the limit switch would go to an input + that isnt assigned presently (this would have to be set up in Mach3 correctly). The switch uses the machine frame as ground so another wire would have to run from the C11 - terminal of the input pin used and run to the machines frame. This switch will only complete the circuit upon touching its limit. The switches are dependable and accurate however this is the opposite configuration of the safest circuits. Being is it a hobbyist machine, I wouldnt worry too much.