The 50% rule deals with houses that are nonconforming to the zoning district they are in. Talk to your local zoning administrator. Basically if your house was built in a commercial or industrial zone, then it would be nonconforming. If it is damaged to the extent that it lost over 50% of its value from fire, etc. then you could not rebuild absence a change of zoning.
Otherwise it is a matter of pure economics. Just compare the values of each alternative after comparing the costs of each alternative. A basic cost/benefit analysis. If after adding onto and fixing up the old house do you still have an old looking house? Or would adding on and changing it make it look like new? A lot depends upon the foundation, the house that is there, and the neighborhood. It the same analysis you go into on deciding whether to put on all new body parts, paint, and putting in a new engine in a wrecked 1980 Chevy. When you are done, you still have a 1980 Chevy with a basic book value. Although I suspect the value of the house would increase as opposed to a car, it may be cheaper to sell and build in a new neighborhood. Good luck on your decision after doing your analysis.