The "for medicinal purposes only" labeling pre-dated Prohibition; there were already tax breaks in place for "medicinal alcohol" and many (if not most) were already taking advantage of that. Also, long before the 18th Ammendment brought in Prohibition on a national
level, many states had already gone dry, and the "medicinal" statement allowed at least *some* sales in those states.
I'm not familiar with the red wing stoneware jugs; I'd love to see some photos.
In the early 20th century "Monongahela Rye" was already as much a romanticized term as it is today, probably more so. Anything labeled as such (my beloved Old Overholt included) most likely bore little, if any, resemblance to the original stuff of a century before. REAL Monongahela only existed as a barreled product, and there never were any labeled bottles. My own suspicion is that it came to be as a result of the long, arduous eastward journey across the mountains to the taverns of Boston, Philadelphia, and Baltimore... where it was consumed by patrons thinking that "Monongahela" was a type of rum. The whiskey-distillers of western Pennsyvania probably never knew what became of their nice, clean, white rye whiskey after they sold it to the shippers.
PS - Thanks for the links, Silverfish. I try to avoid pumping up my own site here, so it's heartening when someone else does!