I'm not sure about the WWII copper shortage. That's just the "story" I heard. Doesn't change the safety issue. Here's an excerpt from a website that attributes the 3 wire "legalization" to the post war housing boom. A little dubious because 1947 seems to fast after WWII for a housing boom. http://www.dli.mn.gov/ccld/PDF/eli_GFCI_history.pdf Circuit grounding was one of the more hotly contested topics in the early history of electrification. In the early 1890Âs, the New York Board of Fire Underwriters had condemned the practice of grounding the neutral as a dangerous practice, especially in a 3-wire Edison (120/240 Volt) system. The Edison utility companies, on the other hand, found just cause to ground their supply systems, even as others thought the utilities were doing this to just save copper and money at the cost of an increased fire risk. The great debate continued for over a decade, but in 1903 the Code was revised to recommend that these circuits be grounded, and finally in the 1913 Code a mandatory circuit grounding requirement was included for circuits like the popular residential Edison 3-wire system. The permission for neutral grounding, the practice of using the neutral conductor as an equipment grounding conductor, was first permitted in the 1947 Code for electric ranges. At around that time many electric utilities were promoting the use of residential 240 V cooking for the post WWII housing boom, and many were even offering to install an upgraded service to older homes at no charge. However, there were no NM cables available at the time with conductors of sufficient ampacity to handle these higher amperage branch circuits. There were, though, service entrance cables of sufficient size, but they had a bare neutral conductor. This special Code permission allowed the frames of these large appliances to be grounded through the uninsulated grounded neutral conductor of the Type SE service entrance cable used to supply the branch circuit. The use of neutral grounding was also extended to electric clothes dryers in 1953. However, almost 50 years later, this special permission for neutral grounding was taken away in the 1996 Code for all but existing branch circuit installations.

"And it would use a red and a black." Unfortunately wire colors mean approximately nothing. Green or green/yellow or bare is typically ground, and white is typically neutral, but beyond that you're on your own-- ie you need to check what's going on-- and you should check your neutrals and grounds as well to ensure that's really what they are. I think the rule for hot conductors is only that they should be something other than white or green. When wiring 240 v circuits with two conductor NM cable you typically mark each end of the white wire with black or red to indicate that is is not neutral. Just last night I was working on a motor where the power cable had wires that were green, yellow, blue, and brown; no red or black to be seen. A shielded SO-like power cable I just bought has three numbered blacks and a yellow/green stripe.

It could be a switch loop with the switch not installed, thus making the otherwise switched device always on. I'd turn off the associated breaker, disconnect and cap off the two wires, turn the breaker back on and see what doesn't come back on with it. You may find that it's wired for the light switch you want.

Alternatively, there was no neutral to the outlet and some idiot decided to use the ground instead. As pointed out that high-impedence meters (which most are, what you want in most cases) will register induced voltages on long pieces of unterminated wire. You are right to be concerned, it is NEVER EVER proper to connect the neutral and ground together in an electrical box or on a receptacle. The test is simple here: Put the blacks on the brass screw, the whites on the silver screw, the ground on the green screw. If the outlet doesn't work properly, something is amiss ahead of this. You then have to go back to other places there may be junctions that have opened up or other damage. Chances are, unless you've got some experience with this, an electrician is the best answer.