I need to replace the door knob for this interior door:

The door knobs I've found at the stores require a 2⅛ inch hole. Mine is only 1½:

Did door knobs used to be smaller? Is there some place I can find a replacement door knob that will fit my door?
If I need to modify the door to fit a modern door knob, will the new hole completely overlap the old? and can I reuse the latch hole?

