There is no debug file. The config.php file has a debug mode that you turn from false to true so you can see coding error messages on the site but it's not outputting any custom errors hence that system it's self seems broken.
I'm not sure if the database is compromised it just seems to be the web files as far as I can tell
Wilson the last updates I done was updating everything to 1.7.4.
There is some custom coding that my IT guy done.
I can't seem to do anything in admin panel as I just get the error 500 screen, so can't attempt your 3rd option.
If I Give you full access to the site could you have a look and see what needs done and if it is going to cost to fix due to bigger issues please let me know.
Copy the error here so we could assist you
Members being online, means you don't have your cron properly configured, which is why the are not logged out after 30 minutes of inactivity, follow this tutorial: https://docs.oxwall.org/install:cron
As to the file upload fail error, where do you upload images? What format do you upload? What is the size of those images?