Why is neutral wired to ground at this switch?
The ground wire is ONLY for emergencies. The 'return' from an appliance or light MUST be a separate neutral wire. Re: "Any help on explaining why this is set up this way" is very simple: THEY WIRED IT UNSAFELY IN VIOLATION OF THE ELECTRICAL CODE!

Yes, you need to run more wire. People do all sorts of crazy things. The NEC exists to prevent fires and electrocution.

You can look up the current electrical code at NFPA.org (free registration required) but there's no search function. Read about grounding and bonding in Section 250.

I'm not quite clear what wires go where, but the outside light needs a switched hot, and a neutral to return from that. 
In previous versions of the NEC, you could have the hot and neutral come to the box holding the light, and lead the hot from the light box to the switch then back to the light. IIUC, this is no longer allowed. 

The only way to do it now is to have hot go to the switch, then to the light, and run a neutral from the same branch circuit to the light. Typically this runs with the switched hot wire. 

So-white (neutral), black (hot) and bare ground to the switch box, black to switch, neutrals connected together, grounds connected together (but not to neutral) then white (neutral), black (switched hot) and bare ground to the light. If you don't have enough conductors for this, you need to run more wire.