Schrade used to advertise their knives as having "Indestructible Delrin handles."
I have never seen any knife that I knew to have Delrin handles, which had any shrinkage of the scales. It is an extremely stable plastic (from DuPont). Admittedly, I am not an expert in the field of plastics, but in my experience I have not seen Delrin shrink.
I think the reason celluloid use declined is because a new generation of much more stable plastics came along, led by Delrin. These new plastics were much more stable and didn't shrink, rarely cracked and did not off-gas.
From the knives I study & research (mostly Schrade & Camillus) it appears to me, from the catalogs that we began to see Delrin appear in pocketknives in the later 1950s.
In researching for this post I Googled "DuPont Delrin" and found the following link:
http://delrin50.dupont.com/timeline.html
It appears that Delrin has recently celebrated its 50th anniversary. The only mention of cutlery in the timeline history is in the 1970s when it mentions that due to rising temps in dishwashers spurred the increased use of Delrin for steak knives and carving sets.
To answer; When did celluloid fall out of favor? I think it was a gradual process starting in the later 1950s and continuing on; by the 1970s there were few major companies using large quantities of celluloid. I dont think celluloid use ever totally ceased, indeed we see a resurgence of the use of celluloid today by some companies. However, I think Delrin gradually replaced celluloid as the handle material of choice for inexpensive and mid range knives. This process was pretty well complete by the early 1970s.
I hope I have answered your question.
There is no date I can give you other than to say it was a gradual process.
Dale