Hope you can offer some advice.
Easter Massachusetts, 1960s colonial-style house. Existing house is 2×4 construction, board sheathing. Walls have dense pack cellulose compressing some old balsam wool batts.

We are bumping out the 1st floor. Bump out roof will be shed-style and meet the existing house just under the 2nd floor windows. (Not my favorite approach but it’s what we can do with the existing house.) 

Architect is proposing running Ice and Water up 4′ of the wall of the existing house where addition meets existing house. Which is to say, the existing 2nd floor exterior wall above the addition will be covered with Ice and Water.

However, the inside of the existing house has foil-backed, rock lathe walls which (I believe) is an interior side vapor barrier.

Aside from replacing all the interior rock lathe walls, what can we do?
Would swapping out the cellulose for closed cell foam help?

Is there a vapor-permeable form of ice and water shield?