[Dan in Pasadena]

You can hire blown in insulation. That was done in my house but it only dates from 1926. Then you COULD use the 1/4" drywall over the damaged plaster. Problem is that your house undoubtedly uses post and insulator electrical....which is undoubtedly overwhelmed with modern demands and (maybe) uses screw in fuses still?!

You'd be better off abandoning that and re-wiring/re-plumbing. This is another case of "while you're in there". Agreed it would be best to have original plaster. But there is a pojnt when its no longer worth it. Does your house have great architectural charm or uniqueness? If not and the plaster is damaged? Has painted over wallpaper that shows? Old, tired electrical AND plumbing?...to me it'd be a no brainer. You can finish drywall to look very much like plaster and in doing it yourself you can save a LOT. The plumbing and even the electrical can be done yourself with the advice of a good electrician. Do one room first to completion and use it as your stronghold for when the project gets overwhelming. You'll get it done.