[John R]

The output transformer has been replaced with a Merrit A-2904. Speaker is hooked to 2 and 5. Is this anywhere near a good fix?

The Merit A-2904 is rated at 18 watts-plenty sufficient for the P-P 42's in the 41-295. Don't have a spec. sheet for the Merit transformer showing the taps but you can refer to this for determining what the primary/secondary impedance should be somewhat close to for this set;
http://www.radioremembered.org/outimp.htm
P-P 42's have about 10K ohms plate to plate Z. Measure your voice coil/hum bucker coil resistance and multiply by 1.25 to get an approximate Z match for the secondary. Mine measured about 4.5 ohms or about 5.6 ohms Z.
Then any where between 4-8 ohms tap on the secondary should work. This assumes you have the tapping diagram which I do not. The Merit A-2904 according to some on-line data has primary taps of 4k, 7k, 8k, 10k, & 14k. and secondary taps from .17 ohm to 32 ohms.? Don't know which wire numbers may be correct but you can experiment if needed for best sound if you don't have the tapping diagram.

The speaker ( 36-1515-4) has been reconed... With a 12" cone. It's distorting on heavy bass even at low volumes. Ideas?

Was the cone replaced by speaker shop? Make sure the speaker is firmly attached to the mounting board. Probably not the voice coil rubbing but you may want to check this. Could be many things including tubes, components especially capacitors causing low freq. distortion. Have you recapped and checked all the carbon resistors for value? Found many in my 41-295 that were considerably off value so I finally replaced them all.
Good luck, John