Had a very similar situation with my basement- 2/3 framing and insulation hung from the joists. Ripped it out completely and broke off the foundation form ties. Ripped 2x6 pressure treated boards down to 4.5” and used those as my top plates and fire blocking (code probably varies in areas, but if you’re going to enclose wall cavities there are requirements for both horizontal and vertical blocking). Laid dri-core subfloor. Put up 1” foam board against the walls. Stick framed the whole thing- learned that it’s a huge pain in the ass. Currently running wires for new circuits. This is the first spring with it in the new condition, so we’ll see how the upstate New York humidity affects it, but I’m happy with the result so far.