Attached is a small image of what my entire lawn looks like

Being from KS and not knowing your zone I can't tell you exact timing for things, but...

Not sure what species of crabgrass you have there, but crabgrass should be going dormant in the next month or two for you. It has already gone to seed, so your control would be a pre-emergent in spring (check timing with your extension service). Since you will be using a pre-emergent you won't be able to do any spring seeding.

Fescue seeding is best done in fall anyway, so you basically need to scalp and dethatch the lawn and overseed then (again, check timing with your extension service). Aerating is a good thing to do when overseeding.

hortster

1. Please identify this type of crabgrass for me.

It doesn't really matter; crabgrass is crabgrass. It is a weed because you don't want it growing in your yard. It needs to go.

2. With it being almost the end of August, and being in Massachusetts, what are my options for killing this week? Should I just wait for the first frost?

No, if you wait for frost you will miss the opportunity to seed a cool-season lawn. I would not try to kill the existing crabgrass with chemicals. I would dig/pull it up if you can and follow proper seeding procedures for a cool-season lawn.

3. Since it has taken over so much of the lawn (80%). I expect to have huge bare spots after the weed dies. What is the best plan of action for that? I plan on de-thatching again, and aerating the lawn, when should I do that?

Right now. If you kill the crabgrass, you basically have to keep a lawn full of weeds at bay for another year. Just till it all up right now and start fresh. You will need to use a crabgrass preventer in the Spring to keep the crabgrass seeds from germinating.

4. Once the weeds are dead and the lawn is aerated, when is the best time to over seed and do I maintain a watering schedule at that point?

Right now. You water just enough to moisten the soil until the seed is established. The soil must stay consistently moist. After the grass establishes, you water deeply and infrequently meaning 1-2 hours a week (at one time) with sprinklers.

Massachusetts is generally USDA Plant Hardiness Zone 5 although some coastal areas can be Zone 6. Crab grass in this are of the world is still a warm season grass that germinates when soil temperatures reach around 60 degrees. Crab Grass does not go dormant, it is killed off by frost and freezing temperatures and grows again next year from seeds dropped on the soil this year, or previous years.
Other than doing what you can to prevent the seeds from growing to maturity there is little you can do to the plants that will not also do grevious harm to the grass you want to grow.
A good, healthy lawn needs around 1 inch of water per week, maybe more during hot, dry weather, but that water should be delivered occasionally and deeply, ie not more often then once per week. Watering for a short time every day does nothing more then encourage "weed" growth. The soil this lawn is growing in also needs to have enough organic matter in it to help hold, and make available, that moisture to the grass roots.
What is your soil type? Sand? Clay? Loam?
How much organic matter is in that soil?
How well does that soil drain?
How well does that soil retain moisture?
What kind of life is in that soil?
What is the tilth (workability) of that soil?
What does that soil smell like?
Perhaps these simple soil tests might be of some help,
1) Structure. From that soil sample put enough of the rest to make a 4 inch level in a clear 1 quart jar, with a tight fitting lid. Fill that jar with water and replace the lid, tightly. Shake the jar vigorously and then let it stand for 24 hours. Your soil will settle out according to soil particle size and weight. A good loam will have about 1-3/4 inch (about 45%) of sand on the bottom. about 1 inch (about 25%) of silt next, about 1 inch (25%) of clay above that, and about 1/4 inch (about 5%) of organic matter on the top.

2) Drainage. Dig a hole 1 foot square and 1 foot deep and fill that with water. After that water drains away refill the hole with more water and time how long it takes that to drain away. Anything less than 2 hours and your soil drains� too quickly and needs more organic matter to slow that drainage down. Anything over 6 hours and the soil drains too slowly and needs lots of organic matter to speed it up.

3) Tilth. Take a handful of your slightly damp soil and squeeze it tightly. When the pressure is released the soil should hold together in that clump, but when poked with a finger that clump should fall apart.

4) Smell. What does your soil smell like? A pleasant, rich earthy odor? Putrid, offensive, repugnant odor? The more organic matter in your soil the more active the soil bacteria will be and the nicer your soil will smell.

5) Life. How many earthworms per shovel full were there? 5 or more indicates a pretty healthy soil. Fewer than 5, according to the Natural Resources Conservation Service, indicates a soil that is not healthy.