Knob and Tube wiring is actually considered very safe as long as it is not frayed or has bad connections. FHA WILL allow a home purchase as long as the wiring is in good shape.
Any home built before the 1940's, may have knob and tube. Sometimes, the wiring has been updated, up to the point where it enters a wall. Then it uses the older knob and tube up through the walls.
In other situations, the wiring may have been totally replaced. Since it is in the walls, no one may know whether it is new wiring or old wiring.
The knob and tube question is totally independent on whether or not the home has fuses or circuit breakers.
Knob and tube involves the wiring throughout the house and the "fuse box" controls how much electricity goes through each wire. Whether fuses or circuit breakers, a home inspector should verify that the electricity being supplied to each wire matches what it is rated for in the distribution panel (whether fuses or circuit breakers).
A fuse box is typically tagged as needing replacement because it can't supply the electricty that is needed for most of the needs of today's home owner. Most fuse boxes are 60 amps. Today's home buyers usually want/need 100-200 amps.
A qualified electrician should be consulted.
Long & Foster Real Estate, Inc.
Lehigh Valley, PA