What is this cap-like part?
"1250 MFD" is 1250 &micro;F &mdash; it's a capacitor.

"50 W.V." is 50 working volts.

Specifically, it's an electrolytic capacitor. If your tester is feeding it AC, it might identify it as a diode, because of the reverse leakage current.

When it does identify it as a capacitor, it isn't surprising that the value is off by quite a lot. Tolerances weren't tight to begin with, and this unit has some age to it, which probably means a lot of drift in the value.

You could try connecting it to a power supply of about 25V or so for a while to see if this re-forms the oxide layer. Pay attention to the correct polarity! If the electrolyte hasn't dried out completely, this might allow your tester to identify it more reliably.