Yes,heating up the inside of your walls! and possibly the contacts on
the outlet.. That's how electrical fires start,Ack!
I'm probably over paranoid,but I'd replace all the knob and tube stuff
F'n *ASAP*. I wouldn't trust it to run a 100W light bulb.
Even newer houses,with 'modern' wiring can make me nervous.
Like how the lights in the bedroom all dim when my GF uses her
hair-dryer. I'm seriously half tempted to run a dedicated circuit for
it. It just makes me nervous.
One of the houses she was looking at buying had oolldd wiring in it,and
someone had spliced in some half-assed runs of Romex at some point.
"So,How do you like it?"
"It's nice,but it's going to need to be completely re-wired before you
plug in as much as a night-light."
Old knob and tube wiring, as another wrote, was probably safe at the
time. The addition of loose fill insulation and adding Romex splices
would scare the bejeezus out of me. I wouldn't sleep there.
One of the first questions you are asked when you sign up for
homeowner's insurance: "Is there *any* knob and tube wiring in the
house?"
I found a short run of remaining K&T that was still running a couple
of lights while I was up in the attic fixing something else. The
project came to a screeching halt and I ripped it out right then and
there and replaced it.
A couple of things from your post:
I had a girlfriend running a space heater on a flimsy lamp cord type
extension. It was very hot to the touch! And the vinyl coating had
that "wet" look. I figured it probably was a couple of hours away
from a fire when I caught it. Yikes!
The bathroom and hair dryer incident that you mention above:
A bathroom should have a 20A circuit near the bathroom counter for
hair dryers, etc. It is required to be GFCI, to prevent you from
getting shocked. (Google this if you don't know what it is.) That
circuit should be separate from anything else. The bathroom lights
and fan should be on a different circuit so they don't dim out when
you turn on a big load. Run 12-2 wire to for the circuit to the
bathroom counter.