Polyurethane foam is an excellent insulator, and it needs no added vapor barrier. Depending on your climate and local building authority requirements, you will need anywhere from 4 to 7 inches of foam. The remaining airspace does not need to be filled. It will help prevent your new ceiling from getting wet from inevitable condensation. Alternately, you could install baffles against which to spray the foam, creating an air gap below the roof sheathing and creating a sort of cold roof, if that has any benefit in your climate.
The foam is such a good vapor barrier, you will need a plan to remove excess moisture from your house. Frequent use of bath and kitchen fans may be adequate, depending on climate and remaining construction. You might consider whole house ventilation through an air to air heat exchanger or similar.
If you are removing the ceiling, you can pretty much use any type of insulation that makes economic sense in your area, but in very cold climates, 9.5 in of fiberglass is not really adequate. In warmer climates, you could avoid stripping the ceiling off by blowing in fiberglass through holes in the ceiling, then patching or covering the holes. You can also apply foam through holes, but you may have to fill the whole cavity, which would be expensive overkill.
I don't think it's possible to accurately place foam through holes such that the cavity is not totally filled, but it might be worth questioning an experienced applicator. If you blow fiberglass, then you will need to add a vapor barrier somehow. Some heavy solids paints meet the vapor barrier spec of 1 perm, so could be considered to be a leaky but adequate barrier. Or you could add a thin layer of foil backed sheetrock. Or just sandwich polyethylene sheeting between layers.
Without knowing your climate or local prices, I couldn't say what the best option might be, but I hope I've given you enough ideas so you can decide on your own. Cheers.
Remove ALL the mortar throughout.
Fill gap with Great Stuff / expanding spray foam.
Let cure and then cut off square.
Drywall the face of the sill plate to cover the foam for fire safety.
Best Answer
Great Stuff foam will not last exposed to the elements and it's not water resistant it's mainly an air barrier. My suggestion is to cut a piece of treated lumber to fit space. It looks like a 2x4 will fit between sill and slab. It can be rip down to be flush with to outside edge of the sill. Run a good bead of caulking first to the inside then install board and finish sealing.