Stabilize what elements are in fair condition, use preventative maintanence to preserve what is in good condition, rebuild as little as possible. It is usually fine to upgrade in service spaces (bathrooms, kitchen, laundry) to suit modern conveniences. Figure out what elements are key to the house ('character defining') and let no improvement mar their condition.

I deal with a lot of historic preservation issues at work. Even new construction in parts of town are subject to strict 'historical' guidelines. My biggest problem with the guidelines we are forced to work with is that they are so much more concerned with the historical trappings and details than they are with the historical spirit and intent of the buildings.

The 'New Beetle' and new 'FJ Cruiser' are perfect automotive examples of what I mean.

museum-ifying it is certainly one approach. and not an invalid one, if you use wmsburg as an example. like wmsburg or not, their approach to restoration attempts to maintain the integrity of the structure through use of as-close-to-original materials and methods as possible. as much as i lean toward the modern, i gained a lot of respect for this kind of paintaking restoration when i worked on a project where i got to watch a carpenter make a wood window by hand and masons put together dry-laid stone structures.

another approach, the one often championed by landmarks groups, is to restore the parts that are to remain original and then make very clear distinctions between original and new. i.e., do not replicate the same era in the new work but distinguish it so that the layering of ages can be recognized clearly. this approach is often actually supportive of very modern additions to historic structures.

rationalist's answer is yet another.

the less acceptable answers would probably include replication of original appearances in new materials (materials not commonly in use in the era of the original building) or the design of an addition to 'match' the original.

there is a lot of wiggle room in this kind of work and then number of answers you get will match the number of people you ask. in preservation programs this almost becomes a philosophical question.

I certainly support the differentiation of replaced/rebuilt/added portions as Steven mentioned. The theories of historic preservation and the guidelines of what is ok to do and what is not ok are changeable enough (and debated enough) that it is important that the next generation of people be provided a clear visual history of the state of that house. A reasonably educated person should be able to look at it and know what is original, what is original underneath but cladding has been replaced with like materials, and what is newer workmanship. Never let the building try to tell a lie to someone looking at it.

it sounds stereotypical ( as , well, is) but I think that in Europe there is a much healthier relationship with preservation - than in the US - , often like you said Steven, there is the distinction made which allows for modern additions to historic structures... It makes me think of the glass floor in the library at the U. of Bologna.. - it's nicely done. but to be sure, they have a more dramatic time gap..and thus possibly easier? statement.
Do you know of any preservation /rennovation work done in the states with the same subtlety as in Europe ...

then again , you showcase it's historicity too much - and wind up with a a freakshow, an exhibition piece that has very little to do with how the building starte, an architectural perversion..

We have this craze in the area for stone walls......everyone wants one cause they look historical.....but are they?....the guys who are building them most likely are ancestors of the Maya or Inca and not New England Farmers.

c, you might enjoy the book "How Buildings Learn" by Stewart Brand as a good introduction to thinking about life cycle issues WRT buildings.

Demolition thru neglect.....it is ugly and sinful!