That looks like how my Atari 7800 was before I soldered the RF switchbox to essentially hardwire itself to being in game mode permanently. The slider switch had gone bad.
Since you're using an NES RF adapter with the 7800, I'd imagine a similar thing is happening. The 7800 was never meant to be used with an autoswitchbox like that. The 7800 doesn't output a strong enough signal to trip the NES RF adapter into game mode, and it's probably outputting like that because of that reason.
That little doohickey the seller gave you might still be of some use. Get any old RCA cable. It doesn't matter if it's mono, stereo, or just a single line. You're only going to be using one line. You can leave the other one or two hanging. Plug one end into the back of the 7800, and plug the other end into that doohickey. Then get a coaxial cable. Put one end on your TV. Put the other end on the other side of that doohickey. If I'm correct, you should have a hardwired connection from the console to the TV. Just make sure your channel is set to 3 or whatever is appropriate. If the picture comes in clear, you've got a good 7800. You may still want to buy a regular switchbox for it, though, but be advised that you will need to manually flip the switch every time you want to play your 7800.