Why not build a drywall curtain. Base plate pinned to concrete floor with a few Tapcon type screws. Studs wedged between base plate and joists. If wider than 4 feet, add a vertical stud. Cover in drywall. NOTE THIS IS NOT CODE AND MUST BE TEMPORARY ONLY!
Create a two or three sided room (but be sure to leave access, like a hinged plywood panel with a padlock, for emergency access to utilities).
If you plan on using this for more than one or two events, consider building real drywall structures (you know, 16 inch centers, etc.). If you skip the taping and mudding, these go up in hours, not days, and will work until you are ready for the real finish project. You do need to be sure to leave adequate ventilation around utilities and easy access. A prehung door also can go up pretty fast.
Drylock is of questionable benefit, IMHO. It's definitely not a solution to a leaky basement...but it sounds like you've done some regrading already which should help with that.
The reason basements are often musty isn't so much from water from the outside but condensation. Basements are humid and cool, so the walls tend to be perpetually wet. The goal, then is to insulate the walls so help prevent that moist air from hitting the cool wall.
When using fiberglass, that's permeable to the air, so the solution is traditionally to put up a plastic vapor barrier. However, if water does leak in from outside, you've now trapped it.
As such, I strongly recommend going with the Building Sciences corporations recommendation of using XPS foam board against the wall and no additional vapor barrier. The XPS acts as a moisture retarder, yet will let moisture eventually dry through from one side to the other.
I went in to much more detail (including my recommendation to use metal framing rather than wood) with this answer here: https://diy.stackexchange.com/a/8644/1209
When finished, the other objective is to try and reduce the humidity in the basement. If you can bring the basement space into being part of the conditioned space, that's ideal. Alternatively, keep that dehumidifier running.
To answer the specific questions:
Is drylock sufficient to use R-15 batt? Or should I skip it entirely?
In terms of creating an insulated finished space, Drylock is of no use. The purpose of a vapor barrier is to prevent moist air from getting to a surface to condense on. The concrete wall will still be cool regardless of Drylock.
If not then should I put in EPS/XPS? (again Drylock?)
Yes to the EPX/XPS (see my linked answer above).
Would I really need more than that?
Code should dictate what is required. Check your local authorities regarding the amount of insulation you need. EPX/XPS will get you more R-value per inch than fiberglass.
In terms of comfort, the biggest culprits in a basement will be air infiltration, the upper exposed part of the foundation, and the space between the floor joists. Focus on those as well.
Best Answer
I finished a basement in MN and spent a whole lot of time researching it. I eventually settled upon a method using XPS, steel studs, and paperless sheetrock as recommended by Building Sciences corporation and the US Dept. of Energy. I detailed the specifics on the answer to this question here:
https://diy.stackexchange.com/a/8644/1209
As for your questions:
I strongly recommend not ever using a vapor barrier in a basement. Read through my answer above for some more details. But, in summary: XPS acts a moisture retarder, but will still allow trapped moisture to dry to one side or the other. And since a basement can have moisture on either side, it's good to let it breath. When I finished my basement in MN, this was the biggest challenge I had with the St. Paul building inspectors. They insisted on vapor barriers, though invariably, in every basement I visited in MN with a VB, it smelled musty. I eventually did enough research to show them that the times have changed and VBs are not recommended that much anymore in basements by modern builders.
adding the fiberglass likely wouldn't hurt anything...it's more insulation. But it may not add a whole lot, either, if the XPS is already sufficiently thick enough. So, the question is how thick is the current XPS? If it's providing a good r-value already, you might be good to go there. Save the time/effort and just stud out from there (using Metal studs, IMHO).
Good luck!