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.
Nothing below grade needs to be insulated in most regions. If you are in Canada or very north part of the world insulating the whole wall is advised but not for those below the border.
I have done a lot of basements. I insulate walls a foot below grade - to create a pure stop of airflow down.
With no wall we stuff as much rockwool in the rim joists as it will hold and sometimes throw a strap or two in to help. Two sheets of rockwool is the norm (depth-wise). You will notice a dramatic difference within a day. Spray foam will provide the same results (maybe slightly better) but if I need to move an electrical/plumbing/gas line it is very easy to move the rockwool comparatively.
Best Answer
Given it's 10 feet tall a dropped ceiling and insulation batts would be the "most obvious" approach (to me) if you deal with the leaks from above by sealing them above. Come down to 8 feet with a grid and place batts on top of the panels.
If you let it leak, then you need to come up with a way to redirect the leaking before you hit the insulation, or use insulation that doesn't care (and costs more.) Something like a set of sloped 2x4 "rafters" to support a piece of plastic attached at the high side and directed into a gutter on the low side, then hang ceiling below them and insulate between.
If the concrete walls to the porch floor are partially above-grade and uninsulated inside or out, then they are also contributing to the cold, since concrete is a terrible insulator, at roughly R1 for 15 inch thickness. Concrete below grade transitions to seeing less extreme temperatures on the outside, but still generally below "comfortable" for people for much time.