A. Before finishing the interior of a basement, first verify that the basement doesn't leak, that there's good perimeter foundation drainage, and that the grade is correctly pitched to control surface runoff.

Applying a layer of dampproofing on the inside of the foundation wall makes sense. Drylok (www.ugl.com) is an oil-based "waterproofer" with a perm rating around 25 that is designed for wet walls. However, the product smells bad and needs days of ventilation. UGL also makes a latex masonry "waterproofer" with a perm rating around 9 that is designed for drier walls and is easier to apply. I've also had good luck using Sto Watertight Coat (www.stocorp.com), a two-component cementitious compound with a low rating of around 1 perm.

Whatever product you use, surface cleaning is important and at least two coats are recommended. You won't need to install 4-mil poly. Poly won't stop liquid water, and a 2-inch layer of foil-faced polyiso board serves as a vapor retarder.

Your suggestion of furring the walls with Z-studs and then infilling with polyiso board provides a strong thermal bridge, allowing unnecessary heat loss through the metal studs. I think it would be better to install a continuous layer of rigid foam insulation directly to the inside surface of the dampproofed foundation walls, using construction adhesive or mechanical fasteners. Tape the seams of the rigid foam so that warm interior air can't reach the cold foundation and condense. Then install furring on top of the rigid foam and finish with drywall.

Instead of furring, you may want to consider building an uninsulated wood- or steel-frame wall spaced away from the insulated foundation wall; this will make it easier to run plumbing and wiring.

Paul Fisette is director of Building Materials and Wood Technology at the University of Massachusetts at Amherst and a JLC contributing editor.