Greetings, I am finishing my gutted basement, and had a few insulation questions. I live in Portland, OR (zone 4).

General information:
My foundation is poured concrete, 4 feet underground with slab floor. The basement walls therefore consist of concrete (lower half), and 2×6 stud wall (upper half). Stud walls have exterior sheathing, house wrap, hardiboard siding. On the interior, there will be 1/2 inch plywood (earthquake retrofit) between the studs and drywall. My house was built in 1967.

Question 1:
I want to use unfaced UltraTouch insulation for the stud wall cavities. Will I have condensation issues within the wall cavity? Outside-in assembly would be: hardiboard, housewrap, sheathing, ultratouch, 1/2 plywood (earthquake retrofit), drywall.

Question 2:
Some cavities were half-filled with old faced fiberglass batts. A general contractor told me not to remove them because they could have vermiculite in them. So my plan is to fill the reminder of the cavity with ultra touch. Will I have condensation issues? Outside-in assembly would be: hardiboard, housewrap, sheathing, faced fiberglass batt (1/2 of cavity), ultratouch (rest of cavity), 1/2 plywood (earthquake retrofit), drywall.

Question 3:
For the lower portion of the wall, I am going to use 2-inch XPS and frame a half-wall around it. How should I make the seam from XPS to upper stud wall? I plan to rabbit 1/2 inch from the top of the XPS so it can sit over the 1/2 inch plywood (earthquake retrofit), and use construction adhesive at that seam. Then frame around it.

Question 4:
Finally, is there a fire risk with XPS touching plywood/stud wall? Everything will be covered with drywall, but behind the drywall, the XPS is in contact with stud wall (i.e. if XPS caught on fire, it would have a path to the rest of the house framing). There is no electrical within the half wall that contains the XPS.

Thanks a million in advance! Sorry for writing a novel above…