Woo that is messed up..Man..what a mess.

Definately looks like a server issue. The file it is wanting you to download, looks like your index.php file.

I think you are right on your guess. Either your webserver is having a major PHP problem or they uninstalled it or they got hackered big time..
Do you know of any other sites on their servers running PHP..if so, check them too.

mikem