Finally looking at those gauge issues on the Barracuda

If you value noise free weak signals on the radio, the capacitor should be retained.
Yes, your mechanical 5 volt regulator ran a bit too high on duty cycle, could been fixed with opening the rectangular little package and slightly bending the contact arm.
Even with a new solid state voltage regulator, the cap is a good idea for proper engineering.
I switched out to solid state inst reg in 1985 Had to make my own noise suppression and make the gauges more stable.