I have heard 1x4 kiln dried should be used. But I also heard to use OSB because it would last longer. I am curious what material is best: 1x4KD, OSB, PLYWD, etc...or if there is a material that has been introduced by someone specifically for this application?

solid lumber will last longer than OSB and is easier to use. If this is exterior furring, it does not need to be kiln dried.

Treated wood, plastics and rigid foam board would last longer. But I haven't seen anything that indicates that these are necessary.

we know from observations that wood, when kept dry, lasts many centuries. We have no such proof that foam or plastic will last that long. There is no reason to use anything else; especially materials that are more toxic to manufacture.

Ok so untreated 1x4 standard wood would work. KD not necessary. I was wondering about the KD as well considering exterior drying. The treated surprises me, I thought maybe treated would be worth it, but if it is covered from the sun and drying out after a rain quickly I suppose it is not necessary. In Chicago this is very rare to find anyone that even knows what I am talking about so hearing from some experienced guys is greatly appreciated. Thanks.

One other comment, is the 3/4" enough grip on the nails to keep the siding on with 100mph winds with the rain screen gap behind it? Have any of you seen any issues with siding being pulled off the house due to high winds? Not the furring but the siding itself.

you are probably better off using pine strapping than spruce; pine won't dry out like the spruce will & it'll hold nails better longer. Always was common to nail claps into 3/4 pine sheathing; usually held unless the siding dries out & warps off.

For better or worse I am installing 1x8 cedar vertical board and batten over 2" of exterior foam in a high wind (120 mph) zone. I'm using regular spruce 1x3 strapping horizontally at 16" oc I'm using Tyvek Commercial Wrap (not regular Tyvek!) over the foam / under the strapping. The siding is nailed with two stainless ring shank nails at each strapping (at each edge of board so 4 nails per strap) Battens have a single stainless trim screw at each strapping run in the space between the boards. I don't have any real pull out data on this but I have had to remove a board or two due to carpentry areas and it ain't easy! I'm confident my siding isn't blowing off.....
By the way, every stick is primed all four sides and ALL cuts are primed with oil based primer prior to install. I would NOT skip this step even though it's a PITA. WAY more concerned about rot than blow off.....

those ring shank ss nails are great, but you lose the clapboard of you ever take it off, cause the nail stays. Good ole 5d hot dipped galvanized box nails are my favorite.

This was red cedar vertical boards actual 7/8 x 7 1/4". I have no intention of ever taking them off! I've used 5d HDG for many years for shingles less than 1'4 mile from the salt water and never a problem. The rough shank on those holds well! and they will outlive the wood they hold too. I used the SS ring shanks to reduce the split potential - and they are great. I hand nail every thing - old school!

Screw them in with 1 5/8" stainless square drive screws.  If you ever need to change a section or make a mod, just unscrew it.   they are a bit  pricy though.

Cheers,
Eric

"By the way, every stick is primed all four sides and ALL cuts are primed with oil based primer prior to install. I would NOT skip this step even though it's a PITA."

I'm planning to use LP smartside. It is a resin-mixed wood fiber product where each individual wood "chip" that is pressed to make the board is 100% covered with resin and sealed so rot should not be an issue. with the 3/4in gap (rainscreen) I am assuming it will all be good.

I plan to use the same 5D galvanized for my installation, should be fine (Chicago Z5)