I looked at the photo of Oak Grove posted from 1935 and I didn't see any lookout in it, but that was just a small part of Oak Grove, so it is possible it was somewhere else.  I'd never heard of a lookout being there, though.  If it is true, I'd assume it was for some kind of training.  Can't imagine what else they could use it for down in the valley.

I concur that there is really nowhere for a cabin that size to go, as its a knife-edge peak. There is no sign of a structure ever having been up there. But it is marked as a lookout on some old maps.