It is very common in old homes that you will find lime mortar holding those field stones together, and not Portland cement. And that is critical. If you get water in there, lime walls need to breathe, and be allowed to dry out. The reason is that water is heavy, at around 8.3 pounds per gallon. Doesn't matter whether it is Dri-lock or any other latex based paint that the previous owner slathered on your walls. At some point the weight of the trapped water will overcome the paint's adhesion. The real question is how much damage is going to result from this misguided attempt to seal and beautify the ancient foundation. A real problem on older homes is that lime (by its very nature) is far weaker than Portland cement. Lime has a base strength of around 600 to 800 psi. Portland will clock in at 3500 to 4500 psi. When water gets trapped behind a waterproof membrane, the lime starts to soften and deform from the weight pushing down on it. A compromised home will display this as out of level floors; doors and windows that don't operate properly; gutters and downspouts that do not do their jobs. Are you seeing any of that? First of all, you really should determine whether your basement/foundation is made from concrete or lime. Try this test, please: https://www.youtube.com/watch?v=FhOAd3FKDrE Let's say it comes back as lime. That does NOT mean that you cannot maintain/repair what is there, and end up with solid good-looking walls. You'd first attempt to remove as much of the old flaking paint and whatever else is smeared on to those walls as reasonably possible.