What is the rule of thumb about replacing knob and tube wiring in an old home?

I had some of it in an old house. When I replaced the box, I got a tight bid to replace the wiring in the house that was exposed knob and tube. I don't know what the protocol is, but the electricians that I had at the time recommended replacing it so I did. They were able to fish new wire down through the walls in those areas without significant damage to the wall itself. They didn't recommend replacing the old fuse driven wire system. They said that they could just tie it together and run it to the new box. They said that that age of wiring was not problematic in their opinion since it was designed to carry a heavier load. Talk to your electrician. If it doesn't sound right. Get a few more opinions. You need to talk to someone who is familiar with old systems. Many newer tradesmen seem to favor the new over the old even when the old is functionally fine. You need to get someone with experience to help you make the call.

I just love it when Real estate agents or loan officers answer electrical questions.  It makes me want to answer FHA questions because I got a loan once. 

Knob and tube is wiring that is 50 plus years old. Wiring was by designed made to last. 30 -50 years.  The fuse box, is another issue that most if not all homeowners insurance will not allow or cover the home if they know. If you can replace it all and the old fuse box too. Your electrician will be required to wire the home up to code. This means in an average bedroom instead of two outlets maybe 4 or 5 outlets.  In the kitchen, this will mean quite a bit of outlets and circuits.
I suggest you get a good electrician who has 10 plus years since they have their license and get one who does their own work.  Check out the electrician with the state prior to calling them in the first place.