Most decomp projects (that I know of) are Ship of Theseus style projects where the minimum unit is a function, give or take alignment requirements and quirks of the compiler. On the MIPS side, tools like Splat and SPIM can help identify function and even source file boundaries, generate inline ASM C files[0], and write linker scripts to build a matching binary. You can then go through and replace the ASM functions one at a time until you just have C left.
0 - for example: https://github.com/Xeeynamo/sotn-decomp/blob/master/src/boss...
Interesting when you mention Ship of Theseus, I never thought of that but I wonder if that is where the name “Ship of Harkinian” comes from?
It has a double meaning actually! The ship of Theseus reference like you noted and the “Harkinian” part being the name of the king of Hyrule from the CDI games. One of his lines is “Enough! My ship sails in the morning” [0] so the project is also a reference to his actual ship. (Referenced in the projects FAQ [1])
[0] https://youtu.be/JmxGLo_itEY?is=x85epFYBcPeRDxxh
[1] https://www.shipofharkinian.com/faq