If one were to consider flames to be the essence of life and the contents of the estus flasks to be flames as well things make a lot more sense.

I have a theory that the old knights could have never become hollow to begin with. I suspect that the flame is merely giving empty armor a form of life, being similar to golems of sorts. This would also explain the reappearence of the dragonslayer.

I have seen many flames and lights in the game at places where things that are either lifeless or dead (for long) are brought (back) to life. In some cases this is done by force by using bodies as a form of fuel to keep the flame alight.

There are strong sililarities between the old knights and drake keepers. While there may not be a direct strong flame nearby, the drakekeepers are allways in the presence of dragons which are capable of producing flames, either indicating a strong lifeforce or a perhaps the ability to produce (new?) life.

This explains why dragons see hollows as a nuisance (if not the least). Hollows seek the flames of life. Perhaps some forces attempted to turn humans into dragons to allow them to stay alive, which would also explain why the ancient dragon is not as ancient as the bone piles in the memories of the giants.

Because mindless hollows and golems drain flames from their surroundings this explains the extinguishing of the bonfires. It also explains why a player can light bonfires while other forms of life are not capable of this as well.

This brings us to the question why the path that leads us towards heids tower of flame also leads us to the iron keep. In a sense the two nations might have either had the same goal at some point in the creation of golems with, different results. Just now I found a video explaining this from translating the text from the ring of blades from japanese to english.

https://www.youtube.com/watch?v=7HvCrnMZJCA

This guy sheds the right kind of light on the matter.