Protection rules for any knob and tube that stays
If some knob-and-tube circuits remain after the panel changes, the electrician sizes each breaker to that wire under the code in force when the permit is issued, and the inspector checks it. Where insulation will surround those circuits, Washington makes protection a condition: breakers or Type S fuses sized to the 60°C ampacity column of the code table the rule references, which for the small copper of that era is often a lower rating than owners expect.
New grounded circuits need somewhere to land
A rewire adds circuits: separate lines for kitchen counters, a bathroom, laundry and other loads the original house never had, each with a grounding conductor that has to terminate properly. Whether the existing service can carry that, and whether the panel has the spaces, is assessed for each house rather than assumed, so a larger service is never a given.