I have never had much of a problem with reusing old PCs as NPCs - mainly, because we are on our 3rd and 4th campaign in the Forgotten Realms since 1992. The PCs of the first and second campaign settled in Waterdeep, but apart from one or two cameo-appearances they never met. The third campaign is set in Cormyr, and the Fourth in Unthalass, both pretty far away from Waterdeep and each other, so there is very little to no contact between old and current PCs.
When a player was booted we had some of his old and his current PC become "guest corpses" or "villain of the week" until we had that out of our system (and long it took - he had been a pain in the posteriour for years), but no other PCs so far were used as NPCs.
When a player was booted we had some of his old and his current PC become "guest corpses" or "villain of the week" until we had that out of our system (and long it took - he had been a pain in the posteriour for years), but no other PCs so far were used as NPCs.