There should not be a problem doing that. Just be aware you can't run all the cables between the new and the old in one large conduit. Derating will apply if you have more than 9 current carrying conductors.

The other important (related) questions that will greatly affect cost are where is the panel and does it have to look pretty when you are done? If the panel is in a basement it will probably be cheaper than if it is currently in a clothing closet. In fact, it sounds like there is no basement, at all, since you wrote that all the cables come from above. What is probably going to have to happen is that the old circuits will probably have to be intercepted in the attic and spliced in one or more large junction boxes to route new cable to a new service panel. That panel can be indoors or outdoors next to the service entrance (meter). If the meter is not close to the new panel location, a small main panel will have to be installed near the meter. Existing cables to outlets and lights can stay pretty much as they are, or new cable pulled to include ground conductors. New circuits can be added as well. As ronnatalie pointed out, it will be an important decision whether to go to a higher larger service enabling you to bring in more power. That entails a new meter with a new meter pan, and new "stuff" to get the power to the meter. Tell me, why do you want a new panel?

The last guy couldn't figure it out either, that's why there's a subpanel - he left the old service in place because he was confused to heck. Find the smallest-value fuses you can. Replace all of them with that. 12.5A isn't a normal common value anymore, so I'm going to bet that one is the oldest. You should probably try to find more 12.5's and use them in all of the spaces. The problem you're going to find with your incremental replacement is that all of those circuits are going to tie into each other in ways that make no sense to you. A 'hot' wire is going to go up in the wall in one room but the neutral to the same circuit is going to be going the opposite direction in a totally different room. You're going to run a new circuit to one room and when you're pretty sure you're done with all of the k&t wire that goes to the old circuit you're very sure you followed, you're going to unhook that wire and three things you thought were completely unrelated are going to stop working. Been there. Done that. I enjoy the challenge, because this is a bit of a hobby to me - and the history of it is as interesting to me as the work, but if you're a "normal" person with a real life... I feel for you.

Wow, that's a great cheap, quick and reversible solution. Thanks for the idea! (And, I've got lots of pins already). Are the pins strong enough with the pulling back and forth to open and close the curtains? I was thinking of sewing rods at the open/close edge of the curtains similar to hotel curtains. I'm taking down wood-slat blinds and can take the adjuster rods off of them. Then I can push to open or pull to close the curtains.