Installing wall outlet in an old junction box

I had a wall receptacle in the house (60s) sticking out of the drywall, not flush with the surface, and wires on top visible (handywork of previous owners), with burn marks. I took it off, capped the wires, removed some drywall and discovered a box (please see picture). I thought of installing a new outlet, but having second thoughts now. Some questions, (1) what does the code say about installing outlets on top of such boxes, is that still allowed (2) wires are very thick, probably 12 gauge, and there is a lot of them crammed in there. An extra outlet would make things even more crowded, and I expect I would have to apply force to push in there. Not sure I should do that. I suspect an outlet here was an afterthought rather than an original design. (3) and the last unfortunate observation, the surface of the box is not flush with the drywall (at least 8mm deep).