I have learned that the house does use the "mysterious" chimney to vent the furnace and the hot water heater. This was likely done when the house was built because the house appears to have always had grates and duct work for some sort of heating system. I called upon a local plumber about the furnace and the possibility of putting in central air and a new furnace, and he said the furnace was being vented through the chimney. He said a newer much more efficient furnace would not be vented through the chimney but the hot water heater would.
With all this in mind I guess there never was a fireplace in the dining room which would otherwise be served by this chimney...but would it be possible to put in a "new" fireplace and connect it up with the chimney that's already there?
Thanks for all of your help. And by the way, the elderly woman who owned the house before me for many years just had the fireplace in the living room converted to gas a year and half ago along with all of the cleaning etc..it works great.