My basement wall insulation preference is to cover the wall with 4×8-feet sheets of one-inch foam insulation. This foam sheet insulation will form a vapor barrier to protect the finished surface from water leakage that could occur in the basement. Use “blobs” of foam-board construction adhesive, about the size of a half-dollar, to secure the foam insulation to the basement wall.
Then, to secure the foam and provide attachment for the drywall or paneling, attach wood furring strips over the foam every 16 inches with Tap-con masonry screws and more blobs of construction adhesive.
Once completed the finish wall will be a 1 3/4-inch thick allowing for real electrical boxes, not skinny one-inch deep ones. The 3/4-inch airspace between the furring strips will allow wires to be “fished” down the wall at a later date. Just in case you build an office in the future and need computer or phone wires some place you forgot to do in the rough.
Whatever product you use to cover this rough wall, be sure to hold the material three-quarters of an inch off the floor. That way the paneling or drywall will not be exposed to any water that may leak through your basement wall in the future.
Unless your wall has giant flaws in excess of one inch, you do not need to build a stud wall in front of the basement wall. Remember, you are in the basement. As for a vapor barrier, the foam created it, and the space between the furring strips will help ventilate moisture away.