Insulation strategies in a house like yours can vary. Do you know if there is insulation in the angled area, the short wall or the flat ceiling area? Has your house experienced ice dams, icicles or leaks this winter? You can replace only the short wall and blend the new drywall into the plaster. No idea what the circle is. There's a lot of good info how to insulate a cape house at greenbuildingadvisor.com.

The circle is likely covering up something e.g. an original large hole that accommodated a light fixture that someone didn't want to patch when the ceiling fan was installed, water damage that someone didn't want to fix, plaster ceiling cut out to install bracing for the weight of the ceiling fan that someone didn't want to then replaster, place where the raccoon fell through after living in the attic. Lots of fun when you have an old house.

We had this same issue with our last house and I have no idea why you need to keep plaster and lath when you are renovating it is hard to match up with regular drywall and honestly adds nothing to your house value IMO so rip it out , insulate properly and get the much needed storage . As for the disk you will need to take the fan down and see what is is hiding up there .

We did have some icicles in the eaves this winter but no leaking that we saw! No insulation in the ceiling or knee wall area at all currently.

I guess we were trying to maintain the plaster to reduce waste! Certainly an option to take it all down if we need to. Our heating bill isn't crazy so I don't know how much we'll save by insulating everything

You will be surprised at how much you will save with both heating and cooling.

We are considering rehabilitating my husband's grandmother's 1850's home. I was told it's best to retain the plaster and lath so that the wooden baseboard trim lines up correctly. Also, I'm told it muffles noise better. But I guess if you busted it out, you could place the drywall at the correct depth? And insulate behind? The plaster ceilings have leaked, and refinishing all the plaster is going to run $2,000 per room. A home rehabilitation person said not to blow in insulation with plaster walls, as it is a magnet for moisture. Is that true? Good luck, Leanne. Hope you enjoy your lovely home!

Here are some pictures from behind the kneewall for context! Thank you for all the input! It's really helping guide

this last picture is looking up into the slanted ceiling