First comments: Cowboy installation of the wiring.
Those wires have been forced in with a screw driver after twisting together. An IDC terminal is only designed to take two (2) wires - they will take three but after a while may fail and certainly not if they are twisted together. there is also a chance that stripped wires are touching or touch something else.
Get a decent IDC/Krone tool - £15 or so. along with some new faceplates - those are ruined.
Pullout ALL wires and cut back so no copper is exposed. Start with the incoming wire from the external master and "punch down" into the terminals - 2 -Blue, 3-Orange, 5-White/Blue, then repeat with the two extensions (you have no real choice). As you "punch down" the IDCs will cut the insulation and make contact and the little flying end will be cut off too.
At a later date you may want to remove the Bell wire (3) but install it to start with so you are fully/correctly wired.
Do all of that and then we can work through it all .
Also, the phone being so close to power can cause noise and hum - but not much you can do about that .
edit to add:
Just looked at the pictures again and the back boxes are metal, the orange wires are very long and very good change they may have been touching.
M H C
taurus excreta cerebrum vincit
Edited by MHC (Tue 13-Sep-11 14:36:57)