Bearing in mind that I hope to do this on a budget, probably in phases with myself doing some of the work, or at least acting as general contractor for some of the work.

Bucks County, PA 18976 - 1.5 story Cape Cod - 1959 - cinderblock construction for the 1st story with stucco on all exterior walls, plasterboard on interior.

Upstairs is stick-framed roof with ridge board, minimal insulation, kneewalls, shed dormer, 6 1/2 foot ceilings.

Planning on getting quotes to demolish upstairs, and frame/weatherproof a 2nd story shell with truss roof in order to get full 8 foot ceiling.

Size of upstairs would mirror the size of the 1st story - imagine a rectangle, 40 feet on the long side, 20 feet on the short.  The short ends face north & south.  One of the long sides faces a road with constant light traffic.

Now the questions - I'd like to tell the builder what I want in order to get the most bang for the buck in terms of insulation/comfort/noise reduction.

Should I ask for 6" or 8" stud walls?
Would closed cell/open cell spray foam be good for the stud cavities, or foam board and/or fiberglass?  What about the ceiling?
I'm assuming ridge vent and soffit vents already on the roof.  I suppose I can always add more fiberglass myself.
Plywood on the upstairs exterior walls - 1/2" or 3/4"? or OSB?
Homewrap and/or insulated siding?
If I do spray foam, can I ask for 1/2" drywall or even 3/8" for the inside?
Would windows on the short sides be a good or bad idea (we're fine if it's better to not have windows there)?
Will probably put 4 windows on the front (2 pairs symmetrical) and 3 on the back.

Would it be better to put wider studs on the north & south faces with more insulation, as well as on the traffic side of the house?  Should I do wrap plus foam plus insulated siding, or is that overkill?  If you had to pick 2, which would it be?  Obviously, I can either do or have done the foam and fiber on the inside, but on the outside, what would offer the greatest return?

I guess I'm trying to think of what a wishlist would be...what's a "really should do" for a 2nd story?

At least take a good look at siding, taped XPS foam, OSB, 2x6 studs, cellulose, smart vapor retarder, drywall. Vented attic with lots of cellulose.

While you have it open, it's worth squirting in some non-expanding foam (such as Core-Fill 500 or TriPolymer) into the hollows of the cinder block on the first floor. The cheapest time to do it is when it's accessible from the top, no drilling required.

Save the foam budget for the exterior where it'll do the most good, and deliver the highest R, and use cheap (preferably sprayed/blown) fiber in the studwall cavities. The thermal bridging of the studs robs it of whole-wall R value. Even 5.5" (R33) of closed cell center-cavity on 2x6 24" o.c. construction only delivers ~R17 whole-wall R at typical framing fractions. But if you went with 2x4" with cellulose and 2" of exterior XPS sheathing for the identical depth you'd be at R20 for a heluva lot less money.

jonr's recommendation for 2x6 w/2" of exterior foam and a cellulose cavity fill as opposed to 2x8 studs is dead-on right. That will yield a whole-wall R of about R25, whereas with 2x8 studs and no exterior foam you'd need an all-closed-cell cavity fill to approach that. A 2x4 cellulose studwall with 3" of exterior polyiso or 4" of XPS would come in at ~R30, and may still be long-term cost-effective. See Table 3 (p13):

http://www.buildingscience.com/documents/reports/rr-0903-building-america-special-research-project-high-r-walls

and table 0.2 (p 10) for zone-5 recommended Rs:

http://www.buildingscience.com/documents/reports/rr-1005-building-america-high-r-value-high-performance-residential-buildings-all-climate-zones

Open cell in a 2x8 cavity might come close to R20, but would require an interior vapor retarder, and would see more moisture cycling in the studs. In Bucks County with the 2x6 2" XPS w/cellulose stackup you can skip the interior vapor retarder entirely- latex paint is enough (see zone-5):

http://www.buildingscience.com/documents/guides-and-manuals/irc-faqs/irc-faq-insulating-sheathing-vapor-retarder-requirements

With R10 on the exterior you have plenty of margin over the IRC minimum, which means the wintertime moisture accumulation in the structural sheathing & studs is already minimal, but with the cellulose to buffer the moisture during those much reduced hours where the sheathing is below the dew point of the interior air, the winter accumulation in the wood is near zero, even with an unpainted interior. A quick dew-point check using weather data for Allentown where the average January temp is ~27F is reassuring, with R10 foam, R20 center-cavity. With 70F/35% RH interior air, the dew point is 40F, but with and exterior mean-temp during the coldest month of 27F, the average temp at the sheathing is 41F, with more drying hours than condensing hours.

At the min-IRC spec still adequately limits the moisture accumulation over the coldest 3-months, but there is still SOME moisture accumulation. The margin is much better with that additional half-inch of foam, and the thermal performance is marginally better too. If you go with R20 exterior foam and R13 cavity fill (the R30 option) it only gets better- the sheathing literally NEVER drops below the dew point of the interior air.

If you have any foam in the cavities such as a flash'n'fill, a minimum of 3" of wet-spray cellulose meets the ignition barrier requirement, whereas fiberglass or dry-blown cellulose does not, in which case you'd need 1/2" minimum gypsum as an ignition barrier

Low density fiberglass in an attic application will underperform it's ASTM C 518 R values by quite a bit due to convective losses at high delta-T when the cold side is up. Blown cellulose is comparable in price, denser, and doesn't have those issues. (And it too can be a DIY with minimal to no training, with a rental-blower from a box store.) It's density can become an issue when you go deep, especially with 24" on center joists. Framing the walls tall enough to allow for at least 18" -20" of insulation all the way out to the exterior wall is worth it. At a settled density of 1.5-1.8lb per cubic foot that adds up to ~2.5ls/square foot loading, and rather than trying to carry it with half-inch gypsum, using 1/4" o 3/8" OSB screwed to the joists helps support the load, and you can then use 3/8" gypsum for the ceilings, which won't sag over time the way even 3/4" gypsum can. Air-sealing the OSB, and staggering the OSB seams with those of the gypsum also helps. Design it such that you get a thermal break of at least 3" (6" is better) of fiber over the tops of the supporting framing or your R60+ attic will underperform.

On the windows, higher solar gain and slightly larger on the south facing wall can make a real difference in your winter heat loading, but also design for some overhang or exterior roll down shades or awnings to reduce summertime gains. On the N side go as small as possible, and low-E. In any budget, going with casements or awnings over double-hungs and sliders gives you much better air-tightness over time, and more egress/ventilation area per square-foot of glazing. Push-out casements & awnings are less finicky than crank-outs, and much quicker in emergencies when considering bedroom egress issues.

I am wondering if you have plenty of unobstructed solar access on the South side? If you decide to demolish the second floor and rebuild it you might add a second floor solarium on that South end (or South West corner) to harvest some of the heat in winter months and vent off the excess in summer. As far as 2X6 or 2X8 framing goes, my thought is that while you gain a bit more in depth of insulation you lose a bit in conductive transfer through each piece of lumber bridging the inside and outside. Standard 2X4 framing on 24" centers will help you justify the price a little more on a double framed wall with a slight inside spacing that can be filled with your choice of insulation. R Factors start around R 40+ and depending on your need can easily accommodate R 60+ if this helps at all.

To get an R40 whole-wall out of double-studwall or Larsen Truss with low-cost fiber will take something like a 13-14" thick wall. See Table 3:

http://www.buildingscience.com/documents/reports/rr-0903-building-america-special-research-project-high-r-walls

With 2x6 cellulose and 4" of exterior iso you hit R40 in under a foot.

For a second-story retrofit double-studwalls @ R60 (or even R40) may present more structural & design problems than the additional benifit is worth.

With 2x4 studwalls you may not always hit code for structural loads with 24" centers, but maybe. The hit in whole-wall performance between 24" and 16" centers can be recovered with as little as 1/4" of exterior foam.

R30-ish with studwall & exterior foam approach is about all that can be rationalized from a long-term cost/benefit analysis in Bucks county. That's achievable with 24" o.c. 2x6 cellulose + 3" of XPS or 16" o.c. 2x4" cellulose + 4" of XPS.

From outside in, siding, house wrap, at least 1.5 inches of foam board insulation with seams taped, OSB sheathing with seams polyurethane caulked, 2X6 stud wall on 24 inch centers with advanced framing techniques (California corners, bridging for partition walls etc), windowpane caulk interior with silicone or even better polyurethane, every place osb meets framing, sills, every seam where wood meets wood, every nail hole, every electric box and all the holes in framing where wiring goes (get yourself a powered caulk gun and DIY this - easy to do, relatively inexpensive and LOTS of bang for the buck on air infiltration, I have a Ryobi 18V and it worked great), blown in cellulose to depth of stud, 1/2 inch drywall sealed to studs, latex paint. Anyplace you can't caulk, foam with great stuff or if you can, get the commercial stuff or even a kit, or hire someone to spray foam the openings in the cinderblocks, the band joist and other bits and pieces. Vented attic, with attic floor structure strong enough to hold R50 or more of blown in cellulose and all openings into attic foamed or caulked. Keep water lines, plumbing and duct work inside the envelope if possible, or insulate and seal them thoroughly if not. Look for a roofing material that is energy efficient (white and/or reflective surface). Depending on prevailing wind, exposure, natural light and if the view is worth it, put in energy efficient windows on north and south, making sure the south ones are rated for good transmittance, though you might want to skip the ones on the north if you don't have a good reason to have them there. Plan any plumbing so it is stacked above that of the first floor and insulate pipes.

If you need to save money somewhere, you could use kraft faced high density fiberglass batts in the walls, if you are willing to do the work yourself and be meticulous to the extreme, fitting the insulation in the wall cavities around boxes, wiring etc and cutting each piece to fit its cavity. Staple edges of craft paper to the outside face of the stud (not to the inside sides of the stud) and tape the seams with acrylic (housewrap) tape.

That said, think about looking into getting a 20X40 modular (living area and roof structure) craned on to your first story, if there is room to do so where you are located.  There are some companies making very efficient modular units, you can get it made to your custom design, and price per sq foot might be very attractive.

-Rosalinda