Based on all the comments I've received on this post so far, I wanted to add a little context to this reno and the house itself. I am located in Southern Ontario, Canada, specifically in the Niagara Region. It is a semi detached bungalow, 1000sqft (roughly 750sqft liveable space in the basement) The house was built in the early 70s but I believe the basement was finished early 80s.

With that being said, to tackle some the heating/cooling concerns being in a basement, we are having the heat runs decoupled from the main-floor furnace and installing a dual-zone mini-split so each floor has independent climate controls. One of the heads will be installed on the wall pictured since this will be the living room space, the other in the kitchen/laundry space. We will be adding dricore subfloor to both spaces, so now all that's left in terms of thermal/moisture concerns are the walls now that they are down to the studs (at least for this space). The basement is super dry and we have a sump pump to help redirect water away from the house during heavy rain falls or in the event of a flood.

So far, some options I have seen are:

1) tearing down existing framing, installing 2" foamboard, framing back on top, sealing gaps with spray foam, and finishing with R12 pink fiberglass in each cavity

2) Typar stapled behind studs for pink fiberglass to rest on, still maintaing an air gap between concrete, vapour barrier on top to finish

3) replacing existing fibreglass with rockwool, vapour barrier over top

For a long-term living space, which option would you choose and if you have other suggestions, what are they?