Looks like the bare wire end in the photo is touching the fixture stud, which is fastened to the box. With a grounded box, that would explain the spark. However, with wiring this old, I'd be very surprised if the box were grounded.

The condition of the conductors in the box doesn't look too bad, considering their age. My guess is that if the fixture failed you'll need to have it rewired, or rewire it yourself. Or just replace it. Then, much as I hate to say it, it's time to put that old ceramic wirenut out to pasture and replace it with a new one. I personally like Scotchloks, but I think I'm probably in a minority. Everybody seems to have a favorite.

PS - it's really not a good idea to be working on live circuits. The fact that the breaker tripped may have saved you from a severe shock.

It might not be "effectively" grounded, but stranger things have happened that a metal box wasn't connected to a ground some how.

I'm not sure that a IDC ScotchLok would be real easy or effective on cloth coated wiring, are not UL listed for such, and are hence NOT LEGAL in most jurisdictions.

Do Scotchlok connectors even have a UL listing?

They are not aimed at the permanent AC building wiring market (as in NEC compliant), but marine, mobile home, etc.

The IDC ones do not appear to have a listing that would apply to building wiring. Some of them do have UL listing for other purposes. Confusingly, 3M also markets traditional wirenuts under the ScotchLok trademark, so I don't know which david was technically referring to. The IDC ones as I pointed out are not listed and further won't even work to my knowledge on fabric insulation.

Before you go spending and money:

If the wire popped loose from the wire nut as you removed the fixture, that bad connection could have been the original problem. Take some fine grit sand paper or emory cloth and clean off all the crud on the copper. Securely connect the wires with new nuts and replace the bulb.

It that doesn't work, then the problem is likely in the fixture and it will have to be rewired.

I was referring to Scotchlok wirenuts. I didn't even know they offered IDC connectors.

Here is a link that might be useful: Scotchlok Wirenuts (red)

OP, be very careful in that box.

It appears to be cloth covered rubber insulated conductors.

The rubber insulation may be VERY dry and fall off the wires if they are moved or bent.

The most common fix is some heat shrink tubing, and you can place it over the existing cloth braid and rubber insulation without removing them.