A portion of a near–term retrofit to my 1925 cape calls for insulating the poured foundation walls. Before hiding any foundation issues with 3″ of spray foam, I’d like to solicit for some guidance. Here are some foundation facts not already mentioned:

77″ total inside height
8″ thick
22″ exposed above grade on East side
33″ exposed on West
Moderate spalling along all lower foundation edges to ~8″ high

From what I understand of Joseph Lstiburek’s Capillary article: http://goo.gl/I0lLM , closed cell spray foam may act as a good vapor impermeable layer on the inside walls and would drive the water/salt bath to the exterior. Further, an exterior sacrificial parge coat with stainless steel cap flashing would keep efflorescence/spalling to the exterior, exposed areas.

Did I understand that right? It makes sense as I read it, but it’d feel better to have a few nods of agreement before I spend a lot of money to make it happen.

Here’s a link to photos of the spalling: http://goo.gl/zTNSy

If so, how does one install that cap flashing? Snap line and a carbide circular saw blade? And, if there’s already paint on the exterior foundation walls, should that be removed in case it’s not vapor permeable? I don’t want to drive that water up to the sill plate, as I have no idea if there’s a capillary break under there.

Thanks in advance for your input,
John