Can disconnected knob-and-tube wiring be left in place?
Yes, you can leave the knob-and-tube wiring in place. Labeling is neither required nor common, but if things are confusing enough that you think it's warranted, it can't hurt. It's also a good idea to rip out whatever wiring is accessible (e.g., in an unfinished basement).

If you have an electrician do the disconnection work, you should ask the electrician to sign a form certifying that all knob-and-tube wiring has been removed. Such a form is sometimes required before blowing in insulation, or when selling the house.