David,
Not being able to see the bag in person, please dont take this as any gospel course of action, but here are my thoughts for what they are worth.
First off, if the pouch has any reddish color and is flaking off bits of the smooth surface, it may have red rot. You cant do much for that sadly, and adding any oil or treatment may slow its demise, but nothing besides neutralization of the leathers over acidic ph can stop it, and I dont think the damage is reversable.
The leather has absorbed too much sulfur either when tanned or from the environment, and every time it absorbs humidity the sulfur makes weak acid and eats the fibers of the hide...or so I understand it.
Hoping thats not the case for your bag, you can add small amounts of a leather cream and see what happens. Dont use liquid oils unless very sparingly. Dried out old leather can sponge up oils with bad results. I have however had some good results with the patient application and reapplication of standard off the shelf mink oil, but weather that will last with out doing damage over the generations is perhaps questionable. A basic rule for conditioning leathers often referred to is "animal to animal"...implying that you can condition with salt free animal fat...like pure rendered tallow. I believe new leather was originally conditioned that way in the old days, so it may be a benificial way to restore a bit of softness now. I haven't much experience with modern chemical miracle rejuvinators, so cant recommend any. If you really want to, feeding the flap this way may give you the desired result, but the leather will always remain pretty fragile I think, and anything you do beyond stabilization cant be undone if it goes wrong.
Im sorry to say, but for truly old and valuable leather objects, stabilization and careful curation are best.
So display of original pouches involving hanging by the strap or excess handling is not really encouraged, at least in my humble opinion. For general storage, the pouch should be laid flat, kept out of the sunlight, and kept in a humidity controlled place, and never displayed where its allowed to be be over handled. To that end, I have recently seen original pouch sets displayed at shows in special long cases under glass, which is great for shows, but then again, maybe not the best for long term storage back at home?
I really believe a good set of photos, a careful set of measurements and detailed construction notes are a good idea in any case, and a carefully monitored hands off approach to displaying it at shows, with careful storage at home are the best course of action. I know that may sound harsh, but old pouches are pretty rare, especially provenanced unrestored, unbroken sets.
Sorry theres no great quick fix answer, but I have given you my best thoughts on the matter, and how I would treat the bag if it were mine.
TCA