"One and Two are the least combustible why isn't NM cable permitted?" NM is combustable... In the sense of fire fuel and travel, and smoke load of a fire. Is my understanding of it... The NEC is written by the NFPA....
Do a little experiment:
Take a piece of NM, and a piece of MC 2' long, staple them to a wall verticaly, and apply a torch to them at the bottom. The one that wins the race to the top looses.
IMO the old "3 story rule" was much easier to interpet: (pre 2002 from the 99' NEC)
336-5. Uses Not Permitted
(a) Types NM, NMC, and NMS. Types NM, NMC, and NMS cables shall not be used in the following:
1. In any multifamily dwelling or other structure exceeding three floors above grade
For the purpose of this article, the first floor of a building shall be that floor that has 50 percent or more of the exterior wall surface area level with or above finished grade. One additional level that is the first level and not designed for human habitation and used only for vehicle parking, storage, or similar use shall be permitted.
That was real simple..... 3 stories OK, 4 stories NOT OK. (Around here 4 stories also triggers the madatory installation of sprinklers.)
Localy NM is limited as follows with ammendments to the 2002 CEC/NEC:
334.10. Uses permitted. Type NM, Type NMC, and Type NMS cables shall be permitted to be used in the following:
(1) One- and two-family dwellings,
(2) Multi-family dwellings permitted to be of Types III, IV, and V construction up to 4 stories in height except as prohibited by 334.12.
334.12(11). Add a new section as follows:
334.12(11). Uses not permitted
(11) In any nonresidential structure or occupancy.
So if you have (like often is the case here) commercial on the lower floors, and residential above. It would be MC and pipe on the commercial and common areas of that space, and possibly NM in the residential, depending on the other limits. The commercial portion of the building is one building type, the residential portion another. So often the buildings are concrete, steel studs, sprinklers and fire rated envelopes of the space. Often a concrete deck on top of it, then a wooden structure built on top of that for the residential portion.