Well... THAT's an expensive house to heat, what with Lake Effect and all!
I think it'd be fine to slip some styrene (pink) foam board into the gap. You could also use polyisocyanurate, but you wouldn't get the benefit of the foil facing because you wouldn't have any air gap.
If you add foamboard, or even if you DON'T, the vapor barrier should ALWAYS be on the HEATED side of the insulated wall in cold climates. That means on the LIVING SPACE side of those studs. Right now, your vapor barrier is gathering moisture (frost) between it and the fiberglass, and when it melts your fiberglass gets wet. On the CORRECT side, it stops any moisture from getting into the fiberglass in the first place, trapping it within the living space where it belongs.
Upstairs... I'd leave the existing fiberglass in place, but strip off the drywall. I'd span the "studs" with heavy (2" thick) horizontal furring strips, and I'd fill the gaps with 1-3/8" polyisocynanurate foam board (foil faced) snug against the existing "studs". I'd seal all joints with aluminum tape. Then new drywall can be added to the horizontal strapping, leaving a 5/8" air gap between the foil-faced foam and the drywall.
In fact, that's exactly what I DID in this house - it's a transitional-timberframe 5/4 cape in Vermont, and we now burn just over two tons of wood pellets (about $500US total) per year, just about 1/3 as much as we burned the first winter, before we did that foamboard job. It was interesting to get the switches & outlets out to the new surface, but I accomplished it by cutting pieces of plywood with box-shaped openings & stitching them into place across the studs. I screwed the boxes into the plywood carriers (mounting ears reversed), so the boxes are just less than flush with the new drywall.
Funny to run a studfinder on these walls, though - studfinder only finds HORIZONTAL studs. 8)
There are no red flags that I see in your question. I don't like drylocking walls that will be covered in basements for the simple fact that if water hits concrete I would rather it go through the concrete than sit in the concrete (where if it freezes then expands will help promote larger cracks). But you have 15 years there and nothing so good for you and with that track record I wouldn't worry about it.
I would personally run roxul in joists and then down a good foot or two below grade, with no vapor barrier (you already have drylock). So what you have is insulation that does well in basements with drylock on one side and probably a decent air gap on the other and below. Would spray foam be better... maybe. It might insulate slightly better but then it is a mess if you do have a problem getting electric/plumbing out of the foam.
Moisture resistant sheet rock? It doesn't matter unless you are having a lot of water gun fights in your basement. The greenboard protects moisture from getting in the front (a little). Any long-term moisture from the rear will effect it like it would regular drywall.
Treated lumber? Perfect. He could have used treated lumber for everything but not required.
You sound like you are off to a good start. If you have more questions let us know.
Best Answer
Drilling weep holes in your foundation can create additional problems.
Water problems around the foundation can be caused by: 1) High watertable, or 2) surface water runoff.
1) If you have a high watertable, a perimeter drain is a must. (Depending on the size of the house, we may run a few drainlines under the house too.) If water is in the crawl space and the drainpipes are not deep enough to collect the water, then weep holes through the foundation wall MIGHT be appropriate.
2) If water is collecting around the perimeter of the foundation, weep holes are NOT recommended, because water will run into the crawl space.
Btw, cinder blocks have voids and can fill with water. Weep holes will allow the water to drain out, but should be installed through the outer shell (face) only. Installing a hole through the inner shell will allow the water in the cells to drain into the crawl space.