If a major electrical code such as the NEC still allows K&T to be used, then I think it would be hard to argue that the method is unsafe.
K&T is allowed only for extensions of existing installations, and elsewhere by special permission. In practice, I don't know many AHJs who would look favorably on this. Here in Texas, where I have seen K&T, it's usually limited to the attic, as there was one pull-chain fixture per room and no wall receptacles. Then you will see where receptacles were added in the 50s and wall switches in the 60s, and it's obvious by the type of romex used. It's just stripped back far enough for the romex conductors to reach the distance between K&T conductors. No, that's not the way the NEC says to do that transition, but that's how it's always done, and it will usually have been done fifty years ago.
K&T stopped being used quite a few years before the NEC adopted this restriction, because it is considerably more labor intensive to install than romex.
I read someplace that K&T is still allowed in flood-prone areas, since it dries out faster than other wiring methods.
Next time I'm in Fredericksburg, I'll take pictures of the only modern K&T installation I've ever seen. It's in a former feed store turned brewpub. It uses #8 THHN, and obviously aims for that antique look. The reason #8 is used becomes evident with a close look at the bulbs: 12V. They are fed from 12V isolation transformers. Apparently, that's what it took to get the AHJ to approve the job.
