(e) a person born in an outlying possession of the United States of parents one of whom is a citizen of the United States who has been physically present in the United States or one of its outlying possessions for a continuous period of one year at any time prior to the birth of such person;
Compare with this, from page 17 of the "U.S. Department of State Foreign Affairs Manual Volume 7 - Consular Affairs," hosted on the Department of State website:
http://www.state.gov/documents/organization/86757.pdf
7 FAM 1133.2-2 Original Provisions and Amendments to Section 301(CT:CON-204; 11-01-2007) a. Section 301 as Effective on December 24, 1952: When enacted in 1952, section 301 required a U.S. citizen married to an alien to have been physically present in the United States for ten years, including five after reaching the age of fourteen, to transmit citizenship to foreign-born children. The ten-year transmission requirement remained in effect from 12:01 a.m. EDT December 24, 1952, through midnight November 13, 1986, and still is applicable to persons born during that period. As originally enacted, section 301(a)(7) stated: Section 301. (a) The following shall be nationals and citizens of the United States at birth: (7) a person born outside the geographical limits of the United States and its outlying possessions of parents one of whom is an alien, and the other a citizen of the United States who, prior to the birth of such person, was physically present in the United States or its outlying possessions for a period or periods totaling not less than ten years, at least five of which were after attaining the age of fourteen years: Provided, That any periods of honorable service in the Armed Forces of the United States by such citizen parent may be included in computing the physical presence requirements of this paragraph."
Section (e) doesn’t apply to Obama if he was born in Kenya. The section you want is section (g). But yes, the law in 1961 was different than today’s law — what it required was five years after the age of 14. In 1961, Ann would have had to be 19 years old to pass her citizenship to her son if he was born in Kenya.
It’s very hard to find something online that shows what the applicable statute (Section 1401, which I posted) provided in 1961, but I did find it once and others have also. The requirements are less today than they were then. It’s no longer five years but two, as you see in the present (g).
I hope this helps.