It's really not a big deal to strip that all back and redo it all. It's much easier that way round than taking a badly constructed "newer" house actually making it solid.
In the UK houses of that type are the standard and renovated all the time.
I think disrupting "decades of ... carefully grandfathered code violations" is what makes it a big deal, not that there isn't a reasonable path forwards simply from a construction basis.
It's not that simple with inspectors before you pull a permit. They will let you do some things some ways some times. It's not predictable what will be allowed. The more change that is planned, the more total things will be rejected. It's usually an adversarial relationship, which makes what is possible even less predictable.
In the UK houses of that type are the standard and renovated all the time.