dir appears to be copied into from tbuf at some point. It puts dir-1 into memory location 8 at the start, and then the code around the 2: section I'm pretty sure is a memcpy-ish loop like:

    c1 = -8;
    *9 = tbuf - 1;
    do {
        *(++(*8)) = *(++(*9));
    } while(++c1 != 0);
    goto 1b; // b for backwards?

It seems that memory locations 8-15 are auto-indexing[0], so the lac/dac i increments the pointed-at location before use, and isz is "increment and skip next instruction if zero".

[0] PDP7 manual, big PDF: http://bitsavers.trailing-edge.com/pdf/dec/pdp7/F-75P_PDP7pr...