My Hair is Frizzy Enough Already

Knob and Tube Wiring.
Dum Dum Duuuuummmmmm.

From my internet research (which I do think has been fairly extensive--I've read lots of electrician forums and other articles), I've learned a lot about this ancient wiring system. It's the original wiring system--and I mean original, like Ben Franklin-esque--that hasn't been used, fortunately, since 1940 in most places. In some more rural areas you might find it in structures built as recently as the late 1940s or 1950.

It is completely unsafe and a total fire trap and you will die if you plug anything into it.

Just kidding. Mostly.

But not entirely. Knob and tube is a system where the wire is covered with cloth (for real) and strung through the studs and connected with little ceramic knobs. There are only two wires (so no grounding). Over time and with manipulation as wiring is added, the cloth can fall away and the ceramic can become brittle and break, exposing the live wires.

We can see the knob and tube in the crawl space and in the attic, where there is insulation over it. Bad idea--insulation? Over a live wire? No thank you. Which is why the absolute very first home improvement measure we'll be taking will be to have the wiring replaced underneath the house and in the attic. Fortunately, 1/3 of the house is an addition from the late 1980s, so that has normal, grounded, modern wiring. We'll be keeping our computers and TVs in that part of the house, so really the only big worry after the crawl space and attic is the kitchen.

Replacing the wiring in the kitchen could be a major, major project. I can't decide if we should just bite the bullet and do it along with the crawl space and attic, or if we should wait. Replacing it means putting holes in the walls at every outlet and potentially ripping out part of a wall to get to the studs. I am not looking forward to this, in terms of finances or the disruption it will cause. Any thoughts?