Old code if I am not mistaken. That fat wire to the pipe should be disconnected at the breaker box. That is if the breaker box is grounded at the service entry. Reason being, if the house struck by lightning and the ground is earthed in two locations, the ground loop can cause a fire,
No, GFI's trip if there is current flow between the hot and earth in the appliance (or circuit beyond the breaker if GFI is at the circuit breaker). This protects you if the appliance has an internal leak to earth; current flow (a few mA's) from hot to earth rather than flow from Hot to Neutral, which is allowed. The idea is to protect you if the flow to ground is through your feet, like in the case of the shocking amp, or it flows out your ass when a fed up wife tosses a hair drier in the shower while you are bathing

You have to press the test button to verify functionality. It won't work without a dedicated ground to the outlet or breaker.
I believe this is actually legal, but would be a good idea to label as OGB stated, and certainly needs to be stated upon sale of the house.
You would not believe what I found in my 100 YO house with "upgraded" wiring.