Re: insulate w/ ballon construction
I have a similar situation, for which a previous owner installed blown-in rock wool. It has been satisfactory. Rock wool doesn't have any compaction/settling issues or moisture issues. Blown-in fiberglass and cellulose are inferior in these regards, IMO. The rock wool is denser.
It is however, wrong to blow in any kind of insulation in the presence of knob & tube type wiring. So check for that.
It's great IMO to keep old plaster in old houses, repairing as needed, because it has a built-in water vapor control characteristic that's really lacking in drywall.
Remove not the ancient landmark, which your fathers have set.