How should an unused knob and tube run be terminated?
I'd have to go double check my NEC before saying for certain, but my recollection is that unless specifically tagged for future use old wiring no longer in service is supposed to be entirely removed. Now, there is some question of the practicality of that when the wiring is not in conduit, etc. but I would suggest getting as much removed as practical before insulating. Getting rid of all of it would be best practice. You also want to be very sure that if any of it is still hooked up anywhere it does not get buried in insulation.