Don't be afraid of the panel. With the main breaker off it's mostly dead - only the incoming lugs remain live.

When I'm doing extensive work on my Square D main (with the ground / neutral bar at the top, near the main lugs) I usually stick bits of electrical tape over the main lugs, for extra security. I don't bother doing this with the GE panels, which have the neutral / ground bars in more rational places.

Wear rubber boots. Keep one hand in your pocket; that way if you do tangle with electrons, they won't cross your chest. Although I absolutely won't do this and emphatically DO NOT recommend it to anyone, there are pros who actually work on hot circuits without dying. So, with reasonable caution, I think you'll be fine working in your panel with the main off.

"In a perfect world, I would like to teardown the plaster walls and replace with dry wall."

Drwall is a cheap substitute for plaster. Plaster became to expansive fro the masses and was replaced with a cheaper method.
It is not nearly as good from a fire or sound viewpoint.
It is not any harder to fix smaller holes in plaster than drywall once you learn how.
A house built in the 1950s could contain either AC or one of the early versions of NM. Open a box and see of there are any ground cionductors, and if they are the same size as the hot and neutral.
Most cables from 1950 contain plastic insulation (even if it has a cloth color layer) and there is nothing worong with them.
At one time no grounding conductors were used, then smaller then #14 (or #12) were allowed, and finally full size grounds in NM cable.
AC cable has used the spiral armor for a ground and works just fine (and is still available) and untill recently was required in all houses more than 3 stories above grade instead of NM.
Do not go tearing things out until you understand what they are.

There is the old adage, if it ain't broke don't fix it. To begin, plaster is layed over wood lath and ripping all of that out would be a big dirty job followed by an expensive drywall job just to replace perfectly good wiring. IF that plaster is compounded with asbestos you won't believe the cost of removal. You don't say if you have a basement or crawl space. If either, it would be a simple job to run your telephone and computer lines.

Cloth sheathed NM is fine. Keep it in place and run additional circuits around it as needed. The only thing to watch out for is the 60 degree Celsius rating of the insulation. Most modern light fixtures require 90 degree rated NM-B. But all you have to do is mount a j-box a foot or two away from the fixture, splice the original wire with modern NM-B in the box and run the NM-B to the fixture... much easier than tearing down walls to replace perfectly good cable!

The main problem with 50s vintage houses is not that the wiring is deteriorating, but that there's not enough of it. They seldom have enough receptacles, and circuits are often overloaded. This can be addressed by installing more of both, and often it requires upgrading the service.

I agree 100% that if you really have lath and plaster, you don't want to tear it out.

My house is the same as yours in age and construction. I just replaced the old fuse box with a breaker panel. It was an intimidating prospect at first, but it's done. With that major step out of the way, I am changing out the old wiring, circuit by circuit.

I am doing all the work myself, having picking up a good book on the subject ("Electrical Wiring Simplified" (? title) is one I see mentioned often here, and the one I have is "Black & Decker The Complete Guide to Home Wiring, Revised to Comply with New Building Code (Canada)", and taking time to make sure I understood all aspects. I also picked up the basic testing devices, so I can double check to make sure there is no energy in the work I'm handling. As davidr says, make sure you work carefully and orderly. I tend to think and test and think again before touching anything, so the work takes a bit longer, but I don't get into any trouble that way. I also work with the main breaker off when working in the panel.

There will likely be a degree of opening access into plaster walls to rewire, but it's not a major thing. There are tricks you can do to minimize this (the Black and Decker book shows good illustrations for all aspects of electrical work, including this). It makes a difference if you have a single storey or two storey house, as with a single storey you can run wire from the basement to the first floor. It's more difficult to run wire to the second floor. I'm running a single feeder to a subpanel on the second floor, from which I'll feed circuits for the second floor via the attic. I'm going to reroute and create new circuits (as davidr says the old circuits are usually too congested or are mixed, and also they may not meet current code), so will abandon many of the old circuits with the outdated wires, so will not have to break out as much of the walls.

It's worthwhile buying a good book, you'll learn a lot, and it will pay off in no time for even common household jobs, like changing switches, low voltage outdoor lighting, and so on. You can ask specific questions here. If you have doubts, then you can get professionals to do the work. At least you will know what's involved.

Ted

Oh, re your other question. I considered doing the rewiring and then having a electrician in to do the panel work, but there was some doubt whether an electrician would do the work, because of liability of the state of the rewiring which was not under his control and knowledge.

If the electrician was to come in to do the panel swapout before the wiring was done, he would have looked at the horrendous state of the existing wiring and also balked, and would have insisted on doing the complete house rewiring, again for liability. The fuse box was an antique and had limited spaces. There were 20A breaker fuses on 15A circuits. Because of the limited spaces, there were so many open junction boxes in the joist spaces of the basement which had as many as 4 mixed circuits connected with only electrical tape. With the new breaker box in, I was able to reallocate circuits and get them on secure breakers.

I would say the complete panel swapout and rewiring, not to mention to repairs of walls etc, would have cost $8,000 or more. It's not only the cost, but the disruption to my life, whereas I would do the work on a priority basis and in my time.

Ted