What options do I have to replace a failed service panel?
OK, are you ready?  We are going to shortcut installing a new main panel without having to fuss with all the existing circuits, which will stay in the old panel.  In brief: 


Have the power company pull the meter.
Disconnect two circuits entering the bottom of the panel that won't have slack for
Pull the old panel off the wall and temporarily hang it. 
Extend the conduit coming from the meter
Fit a piece of plywood spanning the 3 joist bays.   
Mount the old panel to the plywood so it is about 6-8" to the right, and a little bit higher so all the cables will reach.  
Mount a new panel to the left of the old panel, so that it lines up with the conduit from the meter
Run new service cable from the meter to the new panel, including neutral 
Add a 50A breaker in the new panel that feeds the old panel's "Lighting" area
Have the power company seal up the meter box and light you up
Bring over the "main breaker area" circuts at your leisure
Move those 2 circuits from step 2 to the new panel


Making room for 2 panels

That joist area is weird.  I was hoping to lay a new panel in the next joist bay over, but they're all odd sizes and too small.  I doubt a standard 14.5" wide panel will fit where the old one is, and swapping a panel is a multi-day job for a novice.  I want to get you back up.  The normal way you handle that is to mount a sheet of 7/8" plywood across the entire joist area, so you have a tabula rasa to mount whichever electrical gear you please.  



So I want to pull the old panel completely off the wall, unhook it from the conduit linking it to the meter, and pull it out and swing it aside.  All the wires have enough slack except for two cables in the lower left, which we'll unhook from the terminals and remove.  

Then the old panel can be shoved to the right 6-10" and mounted on the plywood, of course.   The upper wires don't have slack for this, so that will necessitate the panel be moved upward several inches also. That's fine.  



This will allow a new main panel to mount to the left of it.  The top priority for its positioning is to line it up with the conduit from the meter, which we extend to meet it.  It also needs to be be spaced so it's easy to run a bunch of conduit nipples between old and new panels, though you could do that with cable and clamps I suppose. If the spacing allows use of premade conduit nipples (including offset nipples) that's a timesaver.  

The new panel needs to be taller than the old panel (so those two cables can reach it).   It needs at least 24 spaces (not circuits; spaces) to be able to accommodate existing circuits.  Normally we shout real loud for the biggest panel possible, because more spaces are just a few dollars more now but expensive and regret-heavy later.  However in your case you'll have an easy upgrade path down the road, so I'm not so worried about it. 

Fixing defects in the meter pan

You will need to have the meter turned off or pulled in order to proceed. 

The old wires are obsolete and worn. So you will need to get into the bottom half of the meter pan to replace the wires (use #2 copper for 125A per 310.15b7, and you can just tape the wires with colored tape, you don't need white/black wires).  The power company may be able to turn power off remotely, but they'll have to physically come out to replace the seal on the meter pan.  They may inspect your work at that point, so have it be tip top.  

Note how the neutral is a bare wire. Use an insulated wire. 

Pulling the old panel off the wall

The two taut cables coming up from the bottom need to be unhooked at the breaker, neutral and ground bar, the clamp loosened up or removed, and the wires carefuly fished out of the knockout and moved aside. 

Then remove the cloth wrapped service wires and remove the "nut" holding the conduit to the back of the box, along with any nails or screws holding the panel in the joist bay.  Be ready with a rope to hang it through the old conduit hole, so it's not dangling by cables. 

Then fit a plywood piece so it will fully back both the old and new panel. It can be L-shaped.  Figure out where the meter conduit will come through and make a nice big hole there.  

The conduit from the meter will need to be extended; I can't tell if it's EMT or threaded pipe, but with the plywood test-fit you can see how much length to add.   Now mount up the plywood.  

Pick the right knockout in the new panel to meet the conduit from the meter, and mount the new panel.   By the way, the reason I dislike fitting a new panel into the joist bay is your new panel's knockouts may not align. Here, you can make it align! 

Then position the old panel as discussed, lining up knockouts between old and new panel as much as you can.   Fit the nipples/short sections of conduit if you're doing it that way (it really is the easiest if the knockouts line up, and don't be bashful about using offset nipples to make it work). Once the nipples are fit, remove the rope, fit a knockout cover in the old conduit hole, and mount it to the plywood. 

Wiring up the service entrance

Assuming your power company wants a 125A main breaker, you will need #2 copper wire (you can use #1/0 aluminum if you don't mind fighting the stiff wire).  It can be black, but mark the neutral with white tape.   

Run a neutral wire from the meter pan neutral lug to the new panel's neutral lug.    

Then run a hot wire from each of the lower lugs on the meter pan, to the main breaker in the new panel.  



Figure out where your grounding rod and electrode enter the system.  That needs to come into the new panel one way or the other.  If it comes into the meter, extend a green-marked or bare wire from the new panel to that location.  If the grounding is not proper, you'll need to make it proper at this point.  

If you used metal nipples/conduit to connect the two panels, the grounds are handled.  Otherwise you'll need to run a #10 ground wire (or larger) from the new panel's ground bar to the old panel's ground bar. 

Now you can call up the power company and tell them to "light it up".  At this point, the top area of the new main panel will be hot.  Avoid it. 

Wiring up the old "Lighting Section"

Get a GE brand accessory ground bar. Fit it in the old panel.  Remove all ground wires from the old panel's neutral bar and move them to this ground bar.    

Now, remove any grounding straps or screws from the old panel's neutral bar.  Run a white #6 wire from this neutral bar to the neutral bar in the new main panel.  

Pull the "Lighting section" breaker (upper left) out of the old panel.  Note it trails two #6 cloth wires.  Follow them to where they go.  Got it?   OK, from each of those destinations, run a #6 black wire from there to one of the terminals on a new 50A breaker in the new panel.   All 3 wires should go through the same nipple.   



Now you can turn that 50A breaker on, and light up the "main lighting" section of your panel.  Welcome back. 



At your leisure or need, move those two dangling circuits to the new main panel.  

Wiring up the old "Main Breaker" section

At your leisure... 

There are five remaining breakers in the "Main Breaker area" section.  Follow their wires back to the cable where they enter the old box.  One at a time, for each cable...   (And you can do this in any order)



The water heater cable (black-white) looks like it enters the bottom. Unhook its wires carefully, remove the clamp whole, and swing the cable over to enter the new main panel. Punch it down to a 30A 2-pole breaker.  



The dryer cable will need to be extended.  Pull its hots off the breaker and its neutral off the neutral bar, and extend it with #10 black, white, red or black.  Bring that into the new panel (all 3 wires through the same nipple) and punch it down to a 2-pole 30A breaker and the neutral bar.   (It is currently on two singles, which is wrong.) 

The other two cables (range/oven) may have enough slack to reach through a nipple and land on a breaker in the new panel. However, their neutral wire also needs to come over - don't skip this step! 

Also, any knockouts which now are an empty hole, fill them with a knockout cover. 

And I think we're done.  Whew. 

With everything depopulated out of the old "Main Breaker" section, you could try pulling the bus assembly out of there and see if it's fixable.  If so, you have a free 12-space subpanel. 

Future

At this point, the upper "Main Breakers" area of this panel is abandoned - you can't feed it, the lugs are fried, and you can't backfeed it.  

The rest of the panel is now a subpanel of the new main panel.  

In the future at your leisure, move circuits one at a time from the old panel to the new one.  Remove any routings through the old panel.  Eventually nothing will come into the old panel except the 50A feed to the lighting section.  Remove that.  Now nothing is hooked to it, and it can be removed.  

The empty space can accommodate a new subpanel if you ever have the need.