SE cable is rated to be concealed even without conduit (NM rules article 334 rules for feeders. 338.10(B)(4) ) but the rub may be maintaining the 1.25" setback and sch40 PVC doesn't help there. They might want EMT sleeves or a bunch of metal plate protection. If you don't have the tools you can buy pre made sweeps for 1.5-2" EMT and that should make everyone happy.
You also lost your Reagan era grandfather as soon as you run new wire so this may need to be 4 wire SER as silly as that sounds. I wouldn't make you do that. (if we let grampa rock, we might as well let him roll.)
You do have a head scratcher there. So many different issues seem to come up but it is starting to look like you are seeing the light at the end of the tunnel