This looks like it's been an engraving machine at some time with twin spindles which are missing. All you have there is the drive motor.

Really if you want to CUT rather than scratch or engrave anything then you need far sturdier spindle and mounts. If you have access to a Lathe and the time then making spindles using ER20 shafts and bearings etc is an option.Then connect to the existing motor with belts and pulleys.

If not then a far simpler and easier option would be a new dedicated spindle like the Water cooled versions from China or a Kress spindle. The WC versions are much better and far more robust and would be my recommendation.

A limit switch is just that a "Switch" at each end of Axis travel which stops the machine from running off or into hard stops and protect it from damage. Often these switches are just simple and cheap micro switches.
There are various ways to wire and often they are run in series with a E-stop button which is a MUST HAVE feature. They should also be hard wired rather than just stop the control software.? By this I mean they should KILL power and stop the machine in it's track then inform the control software to stop.
Only when the E-stop condition has been cleared should the system be allowed to restart and then Only by means of a reset button.