Landslide said:
Either tighten down the wheelnuts to bring the dropouts together, or stretch them apart to fit a wheel in. Old steel frames have enough spring in them that 4mm either way won't matter.
126 from the look of the frame.
There is possibility to get a screw-on fixed sprocket and use a BB lockring with some threadlock.
Stretching rear dropouts to fit unsuitable hubs causes the inner faces of the dropouts to become non-parallel. Too much and the compression forces of the QR effectively bends the spindle.
If you are concerned, replace the spindle with a solid one which won't bend as much as a hollow spindle.
Or, when you'v got the distance correct, tweak the dropouts with a soft faced vice.
Good luck.
Can't see on the photo. If it's a good frame, it might have alignment adjusters in the rear dropouts. These are very handy to help set chain tension and get it repeatable.