Yep, you need what we call a spear or taper tap. The spear screws onto another string of pipe, is lowered into the well and screws into the existing 1.25 galvanized pipe.
If I were to do this I would run the spear in on 1" galvanized for a few reasons, 1) the other pipe may be stuck in whatever is in the bottom of the well and may require some extra pull to free it, 2) PVC pipe has too much flex to be able to screw the spear into the lost pipe.
Luckily the 1.25 pipe will be close to centered inside the 2" so it won't be quite as difficult as fishing for 1" in a 6" well.
I would strongly suggest you call a local well/pump guy who has a hoist truck, a spear and hopefully some experience fishing for lost pipe.