From the top screenshot, it would appear that the projection/coordinate system for your original file is incorrect (or has been incorrectly defined). The display units in the bottom right of the screen indicate decimal degrees, but the XY values are not a possible combination for GCS 1983. This combination of XY values and decimal degree units can only occur if a geographic coordinate system (e.g. GCS83, WGS84) has been applied to data that is actually projected in another coordinate system (for example, the data is in State Plane, but GCS 1983 has been applied as the coordinate system by mistake). If this is the case, then using the Project tool will not help (because you are projecting from an incorrect CS), and may be the cause of the strange output.
To solve this problem, you could try to verify the CS of your original data again, or remove the CS from the data and try to match the unit-less coordinates (preview in ArcCatalog or bring into new map session) to a known/common projection for your area of interest. If you aren't coming up with anything you could post a screenshot of these raw coordinates here and someone may be able to help you dial it in.
*Just out of curiosity: Under Projections/State Systems in your XY Coordinate System tab, try applying NAD 1983 California (Teale) Albers (Meters) to your original data and see if that helps.