With this being year 1 for this type of scenario involving refinance cash out with a portion not being used for home improvement, the Mixed use provisions under Pub. 936 on Page 12 are being used by preparers. 

In this scenario regarding the 2000 purchase and subsequent refinancing, you would need to speak with your client to determine how much of the refi cash out was put back into the house as qualifying  improvements. Admittedly, the client may not recall and records retained by banks for 2000 and 2009 may have lapsed.

This is likely to be a hot topic for clarification by tax preparer and accountant advocacy groups.