Eureka! We're in the engine room! My analysis tells me that if you trace the spinning crankshaft all the way back to its source, you'll find Raleigh's treasure key and sabotage his machine while you're at it.
After infiltrating Sir Raleigh's boat, Sly enters the boat's engine room. Bentley informs Sly that if he can follow the spinning crankshaft back to its original source, he will find Raleigh's Treasure Key. Sly ventures through the engine room, facing Welding Walruses and sabotaging the engine room. Once he finds Raleigh's treasure key, it's mission complete.
In this level, there is a small portion of the level that had giant spinning machine parts and was intended to be in the final game, and was left in the game, but is inaccessible. Looking through the Binocucom near the end of the level shows this area as it was in the "Sly Evolution" video.