I can't imagine *ANY* purpose to connecting a ground wire to a nail. If the box is metal, there should be a wire connecting to some fitting on the box (typically a SCREW used solely for that purpose tapped into the box, or other fitting). A nail would not suffice.

You should be extremely wary of any copper-to-aluminum connections and whether the receptacle is approved for aluminum wiring. Is there a separate ground in the SE cable? Is that connected to the receptacle (i.e., is it four pins). Your local authority may consider this enough of a renovation to mandate bringing that up to code, if not.

Thanks for the reply. I've tried to upload some pictures to show exactly what I'm talking about. Hopefully the links will work.

Here is a link that might be useful: Receptacle photo

Here's another pic.

Here is a link that might be useful: Another photo

Pics are not very good quality. A copper wire running to a nail embedded in concrete is NOT a proper ground. Move the receptacle and ground it properly.

Looks like the nail was used as a grounding point for the receptacle box. The copper and aluminum together is a bad idea. A box is not allowed to be grounded through use of a nail either, has to be a threaded screw. Anyway there is no reason to leave this feed as it is if you are doing so much as putting Sheetrock up. You have to run new 10/3 with ground to your service panel, install a double gang nail on box to the stud for the wall. After sheet rock is up, install a 4 wire receptacle and change the cord on the dryer to a 4 wire cord/ plug. A lot of work but the only time to do it is now. Make sure the washer has a 20 amp dedicated circuit that is grounded as well since now is the time to bring up to code (required too).

Thanks for the responses. I was hoping to postpone upgrading to the 4 prong, but you guys have convinced me it's prudent to take care of it now. Thanks again.