I grew up with vermiculite (now rare due to most of it being contaminated (in the ground) with asbestos), moved on to fiberglass, and am now a blown-cellulose convert.
They all work, for various values of "work."
Cellulose is inexpensive, gets MORE effective when cold, and blocks airflow well enough that a vapor barrier is (possibly) optional according to some researchers. It's dusty during install, but otherwise innocuous. I'd suggest getting a bale from each supplier (or each different brand from suppliers) and inspecting it - or from the supplier you'd go with on a cost basis (first) and if that fails your inspection, from others. I found the sample I got from a major home improvement chain was contaminated with a lot of scrap plastic; as it turns out, not only were the bales from my local home improvement non-chain cheaper per pound, they were also good clean cellulose with no plastic scraps.
Fiberglass compares well at 70F (where R values are measured) but gets quite terrible at -20F, just when you want it working hardest. It's far more prone to air movement (whether in batts, where seams are are a problem or as loose-fill.) Plus there's that whole scratchy thing going on with glass fibers.
According to "belt and suspenders" thinking and "it's cheap enough" my cellulose is sitting on top of a vapor barrier. One more way to stop air movement. Since your climate is primarily heating, your vapor barrier goes on the inside (generally, the "warm" side - complicated in climates where heating and cooling are similar.)
If you are not using the space beyond the wall, insulate the wall (and perhaps add some furring strips to get more insulation on the wall where there is room.) If you insulate the roof, you need to provide cold air channels against the roof surface to vent the roof appropriately (though with that steep of an edge, it might be difficult to get a serious ice dam, which is what roof venting/cold roof design is trying to prevent.)
Since you are gutting it, you may also want to furr out the endwall to make it thicker and give you more space for insulation, since you won't get a lot of R-value with any insulation in the space available. Alternately, and at higher cost, you could sandwich a layer of sheet-foam type insulation over the studs and under the drywall on that wall.
Generally you will also want at least a few cans of polyurethane spray foam. While you can do all your insulating with spray-foam, it's very expensive, relative to other kinds of insulation. But it's great for sealing irregular cracks and crevices.
It's perfectly legal to run JUST a ground wire to retrofit old work. You do not need to also pull all the conductors. This is legal as of NEC 2014, so if your region hasn't adopted it yet, just wait.
People who say "might as well pull all new conductors" do not fully understand what the new rule permits. Retrofit grounds do not need to follow the same path as the conductors. What's more, you can borrow/share grounds from one circuit to another as long as they all terminate back at the same panel, and are of large enough size. That is much easier than pulling all new homeruns! For instance you can run a 10 AWG ground to a clothes dryer, and any nearby 20A outlet can simply ground to that, etc. etc.
It is also both legal and safe to put GFCI protection on ungrounded receptacles or circuits. GFCI protection is safer than a ground, although not as awesome for surge suppressors and radios.
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That's... artsy-looking wiring. I believe the stapling or lack thereof doesn't meet code. We should give due credit though for not jamming all those cables through as few holes as possible.
In any case, you asked about installing fiberglass insulation around the wiring. In the case of cables that fit neat and tidy against a wall stud, as do the three white and one yellow starting at the top left, simply install the batts and don't worry about it.
Cut away insulation so that it fits neatly around junction boxes.
Where cables pass through the middle of the depth of a bay separate the batt halfway through its thickness. Slide part of it behind the wiring and lay the other part in front. This minimizes the compression of the batt. It would also be possible to make cuts in the batt so that the batt can expand around the cable, but if you're using faced insulation it's best to avoid cutting the facing.