I'd say either replace the whole circuit or don't touch it at all.
Is there a reason you want to replace the section in the basement? Is it in bad condition?

I'm replacing the exposed basement sections because I'm about to do a renovation that will disrupt them, and I told my insurance company that I would replace the exposed sections. I really don't want to replace what's behind the walls, that will add considerable difficulty and expense to the effort, and I'm not required to do it.

"I'm not required to do it"

you better check with your local inspector on that. in my area if you replace part of a K&T circuit you replace it all teh way back.

Let's assume that it's acceptable.

assume all you want, before you start this you better KNOW. do NOT go by what your insurance says, go by the stricter of the insurance or local inspector. the strictest one can overrule the other easily. all it takes is a phone call to find out. you don't even have to tell them who you are or where the work will be done.

if you do it, the junction HAS to be in a box. the box HAS to remain accessible so you cannot bury it in teh ceiling/walls. and you have to use approved clamps at the box.

Thanks - for the lecture on procedure, AND for the technical advice that I was after. Appreciated.

the reason why everyone "lectures" about it is that K&T is perfectly safe when left alone. the problem is that when you go fooling with it to attach new wiring the insulation tends to break. htis can happen right where you are touching it, or it can happen a few feet back. if the break is not noticed, the wire becomes unsafe. some areas allow it to be extended, some don't. all you need to do is make 1 phone call. if you rewire and do not do it to code, your insurance company can deny the claim if anything happens.

We recently completly rewired a home that had a combination of K&T and old cloth covered romex. We removed every receptacle and switch and their old metal boxes and pulled romex back to a new updated service panel. Pulled every fan and light and installed boxes where none existed. Took three of us four days. Oh, also redid the service entrance and meter base.

Now, IMO, there is no good reason to replace part of K&T wiring just so it looks better where you can see it.

The consensus seems to be that knob and tube wiring is probably ok, if contained within a wall with no insulation, and not overloaded and not disturbed.

As davidandkasie said, when you start moving the wires the insulation will probably crack and break off. And it might not be where you notice it.

Plus you'll probably get a discount on your insurance if you replace all of the K&T. And it will help with the resale in the future.

We have been involved in a lot of situations where the prospective buyer of a home wants the wiring, panel and service entrance brought up to date as part of the purchase agreement. OP maybe has no intention of selling his home any time in the near future but the K&T would be a real issue in a potential sale of the home. OR, maybe he does.

texasredhead,
Where we bought our house, there are a lot of 1910's bungalows, but since the area is pretty much in demand, we would've been laughed at if we asked the seller for an electrical upgrade.

I've been spelunking in my own house to check out the wiring and I go between being amused and scared. I have a 1912 Oakland, CA bungalow that has lots of knob and tube. There is a fairly modern main panel next to the old asbestos-lined fuse box. There are 12 breakers which are all used, but when I wanted to turn off a circuit to replace a broken switch, I found one circuit that controls about half the house, including the entire second floor, where all our computers are! When my wife runs the laser printer, the lights actually flicker a bit.
There are even more weird things which I want to fix, and I'm forced to act now because we're getting new insulation and if I want to rewire, I'd better do it before they put the insulation down...also, I will not need a $200 electrical inspection, and I'll give the second floor its own circuit.

C'mon man... give the second floor MULTIPLE circuits.

I aim to have one for lighting, plus one for each room. Four in all in the first house I did. Would be five here if I were allowed to do this house my way...

I would run some new circuits as required for loads like computers.
They really need a grounded circuit for a surge arrestor to be effective.

If you are very careful you can cut K&T, slide heat shrink tubing over the old insulation and shrink it in place.

You at least then have a section of well insulated wire that can be brought into a box and connected for temporary use.

The problem with touching the old rubber insulated wire is that the copper wire itself reacted with the rubber to make it brittle, and even curled off with breaks exposing the conductor.
Later on they lead plated the wire to protect the insulation from reaction with the copper.

Even a small job can easily turn into a major exercise in tracing K&T and cutting it back, then connecting new cable to old work boxes.

Even trying to replace a receptacle or a switch often turns into a nightmare as the insulation falls off the conductors.

Heat shrink is a viable repair if you can get back to relatively isolated K&T conductors to extend the insulation from a less damaged area back to the box.

pharkus,
I'd put in two circuits but the circuit for 2nd floor lighting would be just three lights, maybe a total of 60-80w using compact flourescents. This isn't a full 2nd floor, more like half a floor with two rooms. This will be a big improvement on the current setup, where one circuit controls almost all the 1st floor lighting and all the 2nd floor.

Also, I'm just getting started with this, so everything takes me pretty long to do.

See this link:
http://www.markhellerelectric.com/wusplice.pdf

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