TOPIC: what's wrong with this box?

Yep, tinned copper and not single strand AL. And you definitely need an electrician to perform some work on or at least examine this box and the wiring throughout the home. The insulation for the old tinned copper wiring appears deteriorated and conductors are most likely exposed in many areas. This looks to be an distribution panel and not the Service Equipment and the neutrals and grounds should be separated if this is the case. With wiring of this age & type there is usually no grounding conductor to receptacles, if receptacles are testing as grounded this may also need further investigation as you may have "bootleg" grounds (the neutral terminal and the ground terminal at receptacles are wired together).

PLUS the inspector did notice the potential problem in the box, but he also missed the two prong outlets!

Many Home Inspectors don't flag the presence of two prong receptacles as an issue as they were allowed at the time of the homes construction.
Your inspector may have determined that as there were a large number of issues that he would not list every single issue, but that he would list a small number of issues and defer a full inspection and repairs to a licensed electrical contractor. Many inspectors will often use this tactic instead of giving you a full page of items all relating to one system...

well now my problem is a logistical one.  How do I get that addressed as quickly as possible?  We did not sign off, but I don't want to delay the closing which is scheduled for next week. One of the walkthrough items, along with getting proper resetting outlets i areas near the sinks, was to get a proper electrical inspector to look at that box which was not done, so we didn't sign off. How do we negotiate? What I would like to do is negotiate an amount based on the problems found by the certified inspection that they knock off the price of the house .  Does that sound right? So next step would be to get an electrician in there ASAP.

Yes, get an electrical contractor out to give estimates on replacement/repair costs. Prepare yourself for a bit of sticker shock though, eliminating the Knob & Tube wiring and replacing it all with the proper modern wiring and outlets will not be cheap, but it appears that is what is needed if the remainder of the system looks the same (difficult to guess at the scope of the project from one photo).

You want your contractor to verify that wiring in walls and ceilings is no longer K&T, many renovations will only replace the wiring that is readily accessible and the stuff under floors, in walls and out of sight may not have been upgraded. Also be prepared for permits, holes cut in walls, ceilings, and floors and the mess that go along with a project of this scope. Often upgrades will trigger the requirements to meet the latest codes (depends on local requirements)and the simple replacement of outdated wiring may not be sufficient to satisfy the AHJ (Authority Having Jurisdiction, normally building inspector, code enforcement or such). Wiring, breakers and the other components of an electrical system have a service life and older systems often may not suffice for modern lifestyles.

As far as negotiations on price, when you buy a one hundred year old home, you get one hundred years of issues. The house was probably built as was required at the time of construction and what you are looking at are probably going to be considered as UPGRADES, and not as repairs. The ball is in your court, but I would not bet on the seller cutting the price enough to pay for the cost of an electrical upgrade. Also you probably should check with your insurance carrier to determine what they are willing to insure, if the cost of coverage will be prohibitive if K&T wiring is not replaced and so forth. Some carriers have denied coverage to homes with K&T wiring, others may require you to make upgrades to qualify for coverage if they find you have K&T and did not notify them of the condition.

This is not a DYI message board.  Contact a qualified, licensed electrician to make repairs as needed.  Very simple.