Advice on using 130 mm rear wheel in 120 mm dropouts

My old Peugeot frame broke unfortunately so I bought a new (to me) one and am in the process of moving all the components over. Unfortunately, I have discovered that the old frame must have been forced wider at the rear dropouts at some point; the conversion wasn't done by myself. The old frame has 130 mm rear dropouts, the new one 120 mm. The wheel therefore doesn't fit. Is there some way I can remove some of the nuts or other bits of the rear wheel to get it to fit? In particular, I'm looking at the part with a red arrow in the image -- if I removed this but added a smaller washer it would fit (and the chainline looks good). Is this possible?

https://www.dropbox.com/s/pf2rp054d0d8q3w/IMG_5965.JPG?dl=0

https://www.dropbox.com/s/qus4rpqfdbjp2xo/IMG_5964.JPG?dl=0

Common method is to 'cold set' it to 130mm: https://www.sheldonbrown.com/frame-spacing.html

Are you sure it's 120mm? Is quite unusual for a geared frame. Might be 126mm, in which case sometimes you can just shove the wheel in without doing anything if the stays are flexible enough.

Personally I wouldn't remove anything from the wheel itself - likely to cause it to work itself loose/too tight.

Thanks. I'll double check the width when I get home this evening, but I'm fairly certain; it looks 1 cm out at any rate. I'm not that keen to cold set the frame because I may well buy a new wheel at some point soon at which point I'd buy 120 mm (assuming that's what it is). Just seeing if there's anything I can do to correctly space the wheel whilst I save up for a new one!

If it's steel you should be ok to re-size it, Aluminium, not so much.

Have a read of this article on your options.
https://www.sheldonbrown.com/frame-spacing.html

If you were using that wheel in your old frame, then it has already been respaced once to 130mm: it was originally 126mm OLD.

So you can remove those spacers and the one you highlighted: it's there to space the wheel out to 126mm, it extends through the freewheel.

Scroll down the page linked to above, to Axle Spacing Adjustment.