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The second National is a newer Style O.

2 problems here, first the action again is what I would consider very high, (my client doesn't play bottle neck, but plays with harmonics, and harp-y style things). The saddle in this case is glued into the biscuit, and the biscuit is glued onto the cone. When adjusting action should the material come off of the bottom of the saddle like in other acoustic guitars, or is all this glue normal?

My second problem is the pickup has zero output. It's a Highlander RP-1 passive pickup. All the connections look good, and the wiring is really tidy. It seems the original installation was good. Do these things just stop working at some point? The company has gone out of business, so I can't get any troubleshooting advice from them, but from what I understand these were the go to pickups. Any thoughts on how to get this pickup working again?

The only National I ever worked on that was equipped with a pickup had the pickup glued to the bottom of the cone. Thus I was able to work (a bit) with the biscuit to adjust the action of the wretched thing.

Again - RUN AWAY.

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"Act your age, not your shoe size" - Prince

You might try calling national. I know when Don was running it they were very supportive of small time luthiers and very open about sharing information. I know I talked with them several times and was able to visit the shop and get help sorting out some details about best practices for setting the neck one their old instruments.