I'm redoing an upstairs bathroom. The house was built in 1900, it is balloon construction with the upstairs floor being 3/4 tongue and grove oak flooring nailed directly to 2x12 joists running from the front to the back of the house. The upstairs interior walls are built on top of the flooring. At some point someone covered part of the floor in the bathroom with glue and vinyl tile. To make matters worse the wall used as the wet wall is only 2 inches thick, original 2x4s flipped the wrong way some of which have a 3 inch gap cut in them to allow the old 2 inch galvanized vent pipe to pass threw them in order to connect into the vertical vent pipe that ran into the attic and threw the roof.

1st question do I cut the old floor boards out back to the existing walls to lay in a new subfloor (23/32 pressure treated tongue and grove plywood)? Or do I go over the existing floor with something?

2nd question the wet wall needs to be located where it is to avoid having to move the main soil stack, and other drains already connected to it. Can I fur it out another 2 inches using pressure treated 2x4? or, Do I remove the wall and put a new wall up (using pressure treated 2x4)?