Before the councils of the 2nd and 3rd century A.D., there was no Christian Canon per se. Over a series of meetings, people realized there needed to be a canon. Criteria were drawn up. Those works that met the criteria made, or should have made, the cut, and those that didn't didn't, or at least shouldn't have.

The gnostic gospels aren't everything that didn't make the cut, just the more prominent stuff. "Paul's letter to Joe Schmoe" that only Joe Shcmoe's descendants considered authentic didn't make it but is not part of the Gnostic works (ok, I made that up but you get the idea). I don't recall all of the criteria, but the major ones included:
1) authenticated by multiple sources
2) not in serious conflict with other accepted works, although conflicts in minor details weren't necessarily a show-stopper. However, saying "Jesus's body was in the tomb a month after his supposed ressurection" would be a definate veto (AFAIK no rejected work actually said that, it's just a silly example of how this rule might work)

I'm not sure what they did if two otherwise-equally-acceptable works were in conflict with each other. I'm pretty sure least one if not both got tossed.

By the way, the King James Version is generally regarded as inferior to late-20th century translations. Since the early 1600s, the sciences of archeology, translation, anthropology, and the science of interpreting and authenticating ancient texts has improved. Not to mention new discoveries of ancient texts during that time, including the Dead Sea Scrolls. Also, anyone reading the unedited King James Bible who isn't well-versed in the English Language as it existed in the early 1600s is not reading it as it was meant to be read. In other words, if you can't read Shakespeare and get all the nuaced meanings, you won't be able to read the KJV as you would if you were alive in the 1600s.

Hopefully, the translations 500 years from now will be a vast improvement over what we are using today.