Upgrade knob and tube wiring?

I will be selling my $1,000 sq ft SFH (2/1). I put on a brand new roof and new central HVAC. The wiring is old knob and tube and is visible in one room that has no drywall. As to the wiring, which selling strategy is best?

A) Sell as is.

B) Drywall the 1 room and hope that old wiring eludes inspection (is that possible?).

C) Pay $7,000+ for new wiring.

I don’t want to spend thousands on wiring if a great sellers market makes it unnecessary. My contractor / inspector is trying to convince me it’s a moral necessity to update due to possible fire.