Welcome to Coin Community.
This little forum is normally dedicated to studying the varieties of Morgan and
Peace dollars, which makes rather a nicely-sharpened audience for you. As long as you don't mind us pestering you for bigger pictures so we can attribute it.
I can see no reason to doubt the coin's originality. The presence of the word "silver" stamped may help date the actual jewelery but that's beyond my ken. It's my opinion that the coin retains its' greatest value to history just as it is. Original surfaces are prized among collectors, this coin has seen wear (mostly from being worn, I would imagine), and it's likely that the setting has caused marks which further devalue the coin as a collectable numismatic item.
On the other hand, it is almost certain that this was a prized possession at some point, worn as a symbol of someone who cared enough to purchase it for the recipient. Rather like your father did for you.
This setting is inextricably combined with the coin now, part of its' provenance. In your position I'd feel bound to preserve it as it is.
Posted 03/20/2015 11:33 am
Not seeing anything jumping out as a copy. With some closeups (details are a bit hazy) we may be able to offer a VAM attribution. VAM is an acronym for "Van Allen - Mallis" (I won't bore you with a history lesson) but I like to think of them as "Variety Attribution Markers" 
