I just spoke to Carl at Pertronix and he confirmed it was a hardened steel gear. I then asked if it was a melonizing process and he said is was not a melonizing process.
He also said that they have sold these distributors for over ten years with the hardened steel gear and they have not heard of any issues with wear issues on cast iron flat tappet camshafts.
I also got an email from Comp Cams confirming what I suspected:
"That is a cast iron camshaft. You can use a standard cast gear, a melonized gear, or a composite gear. The standard cast gear would be the best choice." - Thanks, Johnathan
I would think that Pertronix (or the vendors that sell them) would have a ton of complaints from customers with flat tappet cams if their hardened steel drive gear was destroying cam shafts, but this doesn't appear to be the case.
If it was major issue for Pertronix, one would think they would have done the simple thing and have cast iron or composite gears made up for them. But Pertronix says the only other gear they sell is a bronze gear.
I am unfamiliar with the melonizing process and how it is different than other hardening processes (I'll have to look into it), but Comp Cams and other literature I have read says that hardened steel are not compatible with (cast iron) flat tappet cams, but melonized gears are compatible.
Perhaps the reason why Pertronix isn't having a ton of complaints is because they actually do use a melonizing hardening process and don't know it?
I don't know, I'm at a loss. I kind of feel that if it was an issue then it would be well known by now. At the same time, now is the time to make a change before any potential damage is done. Maybe run it for another 500 miles and pull it and check?