You've hit a very good point here: most codes I know of allow for additions to existing work without bringing everything up to code as long as there are no substantial changes. The new work has to comply to present codes. From a German/Austrian point of view that means: you can install additional lights and receptacles off existing circuits, you can run new circuits, even replace the panel, but you can't install new receptacles without ground fault protection, period. The latter is a little bitter for many German customers, since 2 wire setups with combined neutral and ground (like old US 3 wire dryer circuits) make it impossible to use a cheap main RCD and necessitate the use of very expensive GFI receptacles (about three times the price of a main RCD but one might need several if the new receptacles can't be put on the load side of one of the new receptacles).
So, in most cases the "grandfathered in" paragraph saves the day, but in some cases it isn't enough. On the other hand it just makes additions(!) more expensive, not making the existing work a little safer (which is what we're talking about here). The aforementiond 2 wire setups are about the only case where it's real hard to improve the safety of existing wiring short of a full rewire.
