Lovely old guitar needing a lovely amount of work...while binding shrinks at a different rate from the body woods, and often separates, it appears to be a different issue here...the binding is probably the least of your worries...while binding is a pain to work on, it can be fixed and/or replaced...the big issue is the underlying problem...while I am NOT a luthier, the pics you've posted seem to show that the neck/neck block of the guitar has shifted southward and it trying to meet the bridge...and in doing so has deformed the sides and possibly the top as well...the sides and top no longer match, hence the separation you're seeing...there are likely some major structural issues going on inside...recommend you have a professional look at it...you might want to contact our own 'fixit' in Florida...former Guild employee...currently an authorized Guild repairman for the new owners...he might be able to give you a preliminary idea of what is likely involved to restore the guitar to playing condition after viewing the pictures. Good luck to you on taking on the project.
It turns out that the problem is not nearly as severe as originally thought.
Initially, however, things looked bleak.
I took the guitar to a highly regarded luthier whom I never used before, and he quoted me $6,000, based on the time he thought it would take to complete the project. I passed.
I then contacted Fixit, who, based on the pictures, agreed with your assessment that there was a major structural issue, possibly due to a severe impact to the guitar. The luthier I typically use also thought, based on the pictures, that there was a major structural problem, since it appeared that the body in the waist area warped and separated from the top. However, this is not what occurred. The plastic material between the top and sides simply shrunk and lifted up beyond the edge of the waist on both sides. The binding is completely intact. Once the protruding plastic is reinserted and stabilized, the area will be completely flush.
This issue has nothing to do with the the fact that the neck block has shifted due to age and string tension, which will require a neck reset to correct. An internal inspection showed no structural issues that would prevent a complete and successful restoration, at a reasonable price.
I have to thank Hans and Tom for their input, suggestions, and offers to assist me in this project. We all want to see this guitar restored, and it will be.
Once the project is completed I will post "after" pictures and provide more information.