This is the best I can find for a diagram of balloon construction.
Basically, the studs go from foundation to roof without a break. Then the floors are 'hung' off of the studs. If a fire starts in the basement, it can travel up the wall cavity to the attic and engulf the house very very quickly. In modern construction the first floor is set on the foundation, then the studs for the walls are set on top of the first floor structure, then the second floor structure is built the the first floor walls, etc. So between each level of the house the wall cavity is blocked. To remedy our situation, if I open a wall, I have to create a fire block at top and bottom. Our building inspector just had me cut boards to the size of the cavity between the studs and nail them in place. The building inspector was really nice and helpful in making sure I did it right. I expected a crotchety old man to snap at me for being a bafoon, but he really took the time to explain things and provide advice and guidance on how to do things right.
When we started the remodel, we had crazy ideas that we could get it done in 6 months to a year. So we gutted 9 rooms in a weekend. Then we hit one snag after another, and with kids, work, life in general we just couldn't put in the time needed to make significant progress. It took us five years to get most of the rooms re-framed (moved several interior walls, removed one that was exterior load-baring wall of original part of house), replace half of the windows, two of three exterior doors, wired, plumbed, insulated, sheet-rocked, taped, painted, floored, and fixtures installed. Oh, and siding on about a third of the exterior that had rotted. We converted two walk-in closets into full bathrooms and took out the 28inch wide bathroom at the top of the stairs. Yes, 28 inches wide, by 11 feet long. My wife had to squat and shuffle to get past the sink to the shower when she was pregnant.
We hired out most of the plumbing work, and I worked along side the electrician to pull wire and he upgraded the panel. Otherwise I did all of the work myself (and with occasional help from friends) until this summer. We hired a contractor to put on new roof, gutters, and replace the garage door that I had installed.
To say this project has been long and painful is an understatement. The mental and emotional toll on always needing to do something on the house and take away time from the kids has been enormous. I took off about four years to help coach a youth sport team and for physical health reasons. This summer I have been trying to push through and get stuff done. The big projects (and big wins) are done, but so many small things need my attention now.
Sorry for the wall of text!