Rigid foam v. batt insulation

Yes, rigid foam with panel joints sealed with tape or sealant OR spray foam are preferable to fiberglass. Unless steps were taken to block and drain water on the exterior of the foundation wall, ground moisture will likely migrate through the concrete or block foundation walls. A vapor retarder over fiberglass insulation will often block inward moving moisture vapor. There it can condense and mold can form inside the fiberglass. I've torn out plenty of finished basement walls built with fiberglass insulation. GBA has several basement wall insulation details in Strategies and Details. Here are a couple:
http://www.greenbuildingadvisor.com/cad/detail/insulated-basement-cold-c...

http://www.greenbuildingadvisor.com/cad/detail/insulated-basement-cold-c...

http://www.greenbuildingadvisor.com/cad/detail/basement-insulation-retro...

You'll notice some of them do have unfaced figerglass insulation - but note that the insulation is inside a layer of rigid foam placed against the concrete.

It's best to avoid leaving an appreciable air space between the concrete and the foam. And make sure to seal the foam to the slab beneath and return it over the top of the foundation to the mudsill.