To make matters weirder and worse, they ran the THHN through the old knobs and tubes with the hot, neutral and ground parallel about eight inches apart
No, that's alright actually. I must eat my words, in-kind replacement in K&T is a fit use for THHN outside conduit.
There's really nothing WRONG with K&T if it's maintained properly and behind GFCI protection since there is no ground. The problem is "maintaining properly" includes "not continuing 80 year old wire in service" and there you are stringing THHN through knobs and tubes, and if you have the access to do that, then you should really be using MC or Romex if your jurisdiction allows Romex.
I wouldn't sit there and say Romex is
better than K&T. What's the complaint about K&T, wires with just 2 layers of insulation between them and building materials? Well that's Romex... Except K&T has ceramic tubes through studs and Romex does not. What Romex brings is grounding. Which is less important now that we have GFCIs but still useful.
Anyway decisions are made on actual safety data collected from fire investigations, and they don't see a high incidence of Romex starting fires due to not having a ceramic tube through studs.
Rather than sweat bullets of replacing K&T "for the safetiez", I would put a GFCI/AFCI breaker on it and not worry about it.
Y'know, on the Romex, you need to use #12 sometimes and #12 is allowed on 15A circuits. So what is the rationale, exactly, for
ever using #14
ever? Easy:
"It's cheaper". Is it really, though? it's cheaper by the foot, but that only holds if you're a pro installing a mile a month. The DIYer who has to put 3-4 spools in their shopping cart of 14/2, 14/3, 12/2 and maybe 12/3... is going to pay more at the register than the DIYer who only buys 12/2 and 12/3. (especially because of the weird way the shorter spools are much more costly per foot). Price it yourself and see.