Insulating Old House Exterior Walls from Interior

Hello! We have a house built in 1920 and are demoing the lathe & plaster walls and replacing them with drywall. While the stud cavities are exposed, I figured it would be the perfect opportunity to install some insulation. I’ve been doing research online and there’s a lot of debate on whether or not to insulate, and if so – the best way to do it.
For context, we have wood siding that’s in decent shape. Behind the siding there is some paper, and then diagonal plank sheathing. Daylight is visible in spots so it’s obviously not a perfect air or water tight seal by any means – something that has helped keep the walls dry for 100 years.
Should we caulk off the gaps between the diagonal sheathing, spray foam gaps, and put some mineral wool in the cavities? Should we throw some fiberglass batts in? Use furring strips to create an air gap between the insulation and sheathing? So many solutions, not sure what the best solution is. We live in zone 3 for reference.
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