Oh dear Joe and Muriel, you do take me back!
My husband and I also spent time during our short engagement making a couple of hooked rugs, his father helped him with his and that rug did yeoman service in our living room in England and at the front door in Canada as it was wonderful at absorbing snow from ones shoes. I only discarded it a couple of years ago and it was then all of 53 years old.
I now have another hooked rug made by the mother of one of my friends, which she sold at the IODE yard sale after her mother died. I myself did one a few years ago for my son's room, he is in the Cameron Highlanders and I had a piece of kilt material and deconstructed the pattern and worked out how to hook it on squared paper. We have a mail order company where one can buy the backing and the wool in round, paper wrapped lots. It worked out very well and now lives by his bed. I can also remember giving my Dad a kit for a present once he retired and he hooked a lovely rug which my daughter still uses (I think). He also did an elaborate round one for my sister-in-law by request. It still goes on but rather erratically I would think.
We also have hooked rugs here which are different from Muriel's rag rugs as they have a continuous piece of material pushed through the backing and so don't have a pile of raw edges but can make very smooth and colourful rugs.
As for re-using knitted wool we used to unpick and wind around one's thumb and elbow and the resulting skein was washed and hung and when rewound was nearly kink free. My Mum used to knit new sleeves for my uniform jumper when the old ones wore out and then more sleeves were knitted from the retrieved previous sleeves. I think in six years of wearing that uniform I had only two bodies and umpteen sets of sleeves. Had to have a new body as one's size changes rather from the age of ll to 17!
We still knit in the IODE, I make mittens from all my odd bits of wool and sometimes hats which we then send to the two Indian schools in Northern Ontario which we support with clothing and school supplies. We spend a fortune on sending books to be given as prizes or used by the teachers who change frequently. Sometimes they will stay a year and sometimes only a term if they find they cannot stand the isolation and privations. There are no roads up there and everything is flown in which is why it is so expensive to live in a Southern Ontario way rather than the Indian way.
As usual you two have unlocked memories, long may the rugs last!