I am about to start work finishing a basement that was constructed several years ago. The basic structure on the exterior walls is a 6' "knee wall" of poured concrete topped by a 3' section of 2x6 framed wall with OSB sheathing. The concrete is currently insulated with faced mineral wool "blankets" while the framed section is fiberglass bats and faced with drywall. The exterior of the concrete is not insulated but does have a black vapor barrier coating. The framed section above grade has stone on the exterior. I don't know what exactly was done to the OSB sheathing, but it was installed by a long-time local stone shop, so I can only assume it was done correctly with whatever barriers are necessary. There is no additional insulation though. My plan is to remove the blankets and install 2" polyiso, including on the exposed ledge of the poured concrete, and then build 2x4 walls inside of that (floor to ceiling, hiding the exterior framed section behind it). Those walls will be finished with drywall. However, I am not sure how to handle the framed section, and I haven't really found a comprehensive answer anywhere. As I see it, I have several options: 1. Leave the drywall covered walls in place behind the newly framed interior walls. 2. Pull off the drywall, remove the fiberglass, and install the same polyiso against the interior of the OSB (and seal all the edges with foam). 3. Do either of the above and stuff fiberglass or mineral wool into the cavity I create between the new interior wall and the exterior. My main concern, of course, is to make sure I am not creating a moisture problem. Any recommendations? (Near the northern end of Zone 5 BTW).