Some of those old posters have "its" spelled as "it's", was this how it was spelled before or is this a spelling error?

Still an error - just poor copyediting.

Wow. That's tax payer money at work?

The notorious film Reefer Madness was actually privately financed by a church group.

As an example of how forbidding something can make it attractive, it was re-cut into an "exploitation" film...

> privately financed

this means we have no clue who paid right? as in: it could still be tax money through the CIA or smth.

Privately doesn't mean secretly in this context, and the CIA did not exist in 1936. I don't know who precisely funded the film, but I've never seen anything that calls into doubt its purported source of funding.