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)
While closed cell foam will perform a bit better than fiberglass in noise reduction, there are much better ways to tackle this for the same or lower cost. What you really need for sound isolation is to add mass between the living units and to mechanically separate them.
If both living areas are sharing a wall, building with double studs that are staggered will prevent sound from traveling through the studs from one dwelling to the next. Another great option for soundproofing is to use double layers of 1/2 inch drywall or a single layer of 5/8 inch drywall on each side (or at least on your side) instead of a single layer of 1/2 inch (typical).
I've used 5/8 inch drywall everywhere in my home that I've remodeled and even without insulation in the interior walls, it's helped tremendously. I'd skip the cost of cell foam for interior walls and only use it where needed for air sealing and insulation from heat and cold.
Best Answer
If you use anything Use foam, fiberglass gets its R value in the volume. The block wall actually has an R value, I think when I poured my shop walls there was foam on outside and inside and I think the wall was rated at R 50. Since you have a solid wall I might just have an air space. As 1” of foam is expensive for the R value and the air space is actually an insulator. I would base my choice on the r value of foam panels vs the cost.