Alpvogt,
Yes, you have a mark 66 motor which is used for all of the new Hydra family of 2.75 inch rockets that are famous for being fired from the Longbow Apache among others.
Yes, the motor you have has the stub of a 2.75 inch Illum Flare, either visible or IR (There are two different flares)
The flare is an interesting collection of pieces. When the flare is fired, an internal fuze functions when the inertia shows it is up to speed. The fuze causes the rest of the flare to separate from the motor. The motor falls to the ground, and they usually stick in the ground so it looks like a forest of white trees under the area where the rockets were fired. When the flare separates, a large orange and white parachute comes out of the flare body and slows the flare down. The cable from the parachute runs through a questionable conduit in the flare, and fires an igniter charge at the other end of the flare. If everything works right, the flare starts burning and is floating under the parachute.
I said questionable conduit, because there is a very high dud rate on these because the cable fails to pull through the flare and start the flare burning. So, many unburned flares can be found on the ground that are still armed with the igniter in the nose waiting for the cable to be pulled hard enough to get it to fire. There are some black powder pellets in the igniter that start the illuminant composition if the thing works.