Can a long stem be used safely with a short head tube?
If the quill stem is in the steerer tube at or past the minimum insertion length then mechanically this should be safe regardless of the height above head tube. This is assuming that the bike is still running a threaded headset and quill stem and the headset was correctly fitted with the fork.

I can't comment on the effect on handling and how safe the bike is to ride now.

Great bike by the way.