Knob and tube is acceptable and safe if it is in good condition and not in contact with added thermal insulation in the walls. Don't be afraid of it just because of what it is. If insulation is falling off the wires, then there is more concern.

K&T of course does not have a ground wire, but GFCI receptacles can be used on K&T to provide good protection against electrical shock, even without the ground wire. This isn't too urgent in a 2nd story unless there is a steam radiator or upstairs plumbing someone could be touching while holding an appliance.

Your kitchen probably has been redone with NM cable (also called Romex) which is plastic covered, although considerably less than an inch wide unless it is very heavy gauge for a water heater or stove. To be sure, someone could pull a receptacle out of the box and see what kind of wire comes to it.

It isn't hard to replace receptacles with GFCI receptacles unless the box is too small (the GFCI does take up more room). You may be able to find the first receptacle on the counter circuit and put the GFCI there to protect the rest of the receptacles without changing out all of them.

There is a $5 receptacle tester that is available in hardware stores that just plugs in and has 3 lights to tell you if a receptacle is wired right. The version with GFCI test button costs a little more and would be worth it if you aren't sure what is and what isn't GFCI protected. There are a few problems it doesn't catch and it misdiagnoses one (but at least it tells you it isn't normal). Overall it is a pretty good indicator of trouble and would tell you if anything is connected to the ground terminal on your receptacles.

You sound like you are not into DIY electrical work. I'd suggest you get an electrician to come and
1) put the minimum number of GFCI receptacles in your kitchen to protect all of them
2) put GFCI receptacles in any critical places on the old wiring (bathrooms, particularly)
3) inspect the condition of the old wiring where it is easy to access
4) give you an estimate on any other work he recommends, for you to think about and schedule at your convenience

Agreeing with everything Billhart wrote...

Have you looked carefully at the breaker panel to see if any of the circuit breakers are GFCIs and/or AFCIs? (They have test buttons somewhat similar to the buttons on GFCI outlets.) It's entirely possible that your kitchen counter outlets are already GFCI-protected at the breaker level, even though the receptacles appear as ordinary three-prong outlets. (Note that GFCI protection of kitchen counter outlets was already code-required 11 years ago. Ditto with bathroom receptacles.)

Another thing you may want to consider asking your electrician is whether s/he recommends installing AFCI (arc fault) breakers for the upstairs K&T circuits. (That's if you decide against complete re-wiring.) They might add at bit of peace of mind when it comes to the fire risks of the old wiring.

We had knob and tube replaced on the second floor of our previous house that was about 1,800 square feet and I think it cost about $5,000 to $7,000. Obviously there are many variables, but I would have a licensed electrician inspect as much as he/she can see and then give you guidance on replacement. Also, if you have plaster repair and painting to do, it's much better to do the electrical first. Otherwise you're repairing the walls twice. Here's some info on evaluating wiring.

Here is a link that might be useful: evaluating your wiring