Sawdust and bark were used as insulation. And carpenter ants chewing out nests are another possibility.

I am starting to think that it is old insulation. I didn't see any obvious signs of damage, which there should be something considering the amount of sawdust. I also didn't find any signs of nesting, like droppings or ammonia smell or any mixing of batt insulation with the sawdust. it was all sawdust. I should note that it wasn't fine, dusty sawdust; it was larger granule sawdust.

Interestingly, I found some odd objects in the eve. I found what appears to be a civil war-era glass syringe, a 2-inch brass ring, a shard of mirror, and a weird leather strap/buckle. All this was within two feet of the end of the eve.

So my question is now, if it is old insulation, is it a good idea to remove it so as to allow for air flow?

I found what appears to be a civil war-era glass syringe, a 2-inch brass ring, a shard of mirror, and a weird leather strap/buckle...within two feet of the end of the eve.

Packrats.

If it's clean, you could keep the sawdust insulation, though it's not effective--maybe R1 per inch and add blown insulation or batts above.

Ventilated attics work by the air coming in the soffits and exiting via roof or ridge vents. So unblock the soffits and if needed use soffit (insulation) baffles to keep an unobstructed flow between the soffits and roof vents. See pic. Use the baffles continuously along the roof, not just a few to "save" money.