OK, well it definitely needs repotting.
I would remove and carefully remove the old medium trying not to damage roots. Is that moss as a medium? It looks very old so it's hard to tell. Moss can be removed with tweezers if packed very tight. Sometimes wetting it can help free it.
Once you have removed as much as you can then I would remove any hollow or mushy roots. Personally I never remove healthy roots. I read advice to do that when I first started out and regretted it after doing that with my first. Now I never remove healthy roots on Phals (though I still do on Cymbidiums, it seems to work on those).
Find a pot which just fits the good roots. The one it's in is too small, but don't go too far the other way, just fitting is best, a pot that's too big tends to stay wet inside too long and cause lack of air flow which in turn causes rot.
Choose a medium you are comfortable with. This is different for everyone and one of the things you will find most conflicting advice on. Some people will tell you to stay away from moss for Phals... I used to be one of them... but it works for many growers.
Moss tends to dry slower while bark dries quicker (especially new bark). I like plain Leca for Phals, which dries very quickly and needs watering often. Some people find the Semi-hydro technique works for them (which uses Leca but keeps them always wet). S/H works for me in Oncidiums, & Phrags but not in Phals as it tends to need warmer temperatures than other medium due to the cooling affect from constant evaporation.
Choosing a medium is all a matter of balancing how often you are happy to water, with your environment and how fast the medium dries. Difficult really for someone to advise you on that.
I used to try and wash the roots when repotting, sometimes with Listerine as I had been advised. Usually I don't bother with that now unless I am trying to get rid of something stuck to the roots, and I've not bothered with the Listerine for a long while.
If you repot with moss then don't pack it too tight. Generally whatever medium you use should leave the plant stable in the pot, but not be too tightly packed as orchid roots like to breath.
If you repot with bark, then it can be best to either soak it for 24 hours first, or to pour boiling water over it a couple of times which I've read will open the pores in the wood meaning you don't need to soak first.
I think that's all the advice I can think of just now. Hope it helps. Of course like you say there is conflicting advice everywhere so this is just my
---------- Post added at 09:13 PM ---------- Previous post was at 09:10 PM ----------
Oh, I forgot about the flower spike.
It's possible the buds will blast if you repot with it's in spike, however phals often don't and many people say it's fine to repot in spike.
Personally I've made the mistake of waiting to repot, then having more problems with the plant as a result, so I always repot and don't worry about the flowers now. I would rather save the plant than keep the flowers.