I have a house built in 1951. The older part of the house has 2 prong receptacles with no ground wire BX casing to permit a ground connection. There is also no metal conduit that would allow me to use the metal receptacle box as a path to ground. The newer part of the house (kitchen and bathroom downstairs) has 3 prong receptacles with a true ground back to the ground bar in the service panel (fairly new 250 amp box). I am wanting to set up my computer upstairs in the older part of the house. Does anyone know whether I could use a device called a TVSS at the service panel to provide "whole-house" surge protection, even for the 2 prong receptacles? The other problem is that I will need to replace the 2 prong outlets with 3 prong outlets to accommodate computer and other newer equipment. Of course, the ground slot in the outlet will only serve as a place holder. How can I do this and still be code-compliant?

Yes a TVSS is a good idea.

You can replace 2 prong outlets with suitably labeled 3 prong GFCI outlets. The appropriate labels "not grounded, GFCI protected" or whatever are in the box.

It's still strongly recommended 3 prong grounded outlets with computers supplied with 3 prong plugs.

I read somewhere that using GFCI outlets in a 2-wire system would defeat the benefits of a TVSS. I can't understand why this would be true. At any rate, I would love to install 3 prong grounded outlets but would have to knock through some walls to run the wiring...

A GFCI would not defeat the TVSS. The TVSS will do line to line and line to ground. To prong outlets such as those connected to ground via a coax TV input would get the benefit of line to ground protection.

The GFCI measures the difference currents between line and neutral.

You could do surface mount wiring such as wiremold. The biggest areas that would benefit with 3 prong are the computers and the entertainment center.

Keep in mind, TVSS devices do not work without a proper equipment grounding.

A GFI will not solve this problem.