Systematically rewiring house

Over the course of the next couple of months, I am going to be rewiring my house. I was going to upgrade the service from a 100a to a 200a but I found out it really isn't beneficial for my situation. Here are some of my questions:
1. Is it okay to put all the 1st floor light on 1 circuit? I am running 12/2 wire on a 20a breaker. I have a total 8 lights including the 3 exterior lights.
2. When I rewire a certain room, what should I do with the old wiring? Should I trace back the feed back to the nearest box and wait until I do that section to go any further?
3. Any explination of wiring a 3-way switch. I only have 2 in the house controlling 1 light (stairway) and I really don't want to keep any of the old wiring (its the old cloth insulated type)

I think that's it for now. If you have any other tips that might aide me along the way let me know. Thanks

Don

 

(1) Yes.
(2) Remove as much as you can. Disconnect the rest at both ends and cut off as much of the ends as you can. Push them out of the box so that they are inaccessible.
(3) There are at least five ways to wire a 3-way switch setup. I recommend Power-switch=switch-light, where "-" is 12/2 and "=" is 12/3.

Frankly, the basic questions you ask are not consistent with someone about to rewire a house. Please get several books on home wiring and read them cover to cover. I recommend Wiring Simplified and Wiring a House. There's a lot more to this work than string cable and making connections.