My project is in DE near the beach – a high moisture area. I have a slab on grade “cottage”. The walls are 2×4’s on 2’0 centers vertically with 2×4’s also on 2’0 centers horizontally to the outside of the vertical studs – covered by painted T111. The “lid” is conventional trusses, vented, with foil faced rigid foam on the underside of the bottom truss chord. It was supposed to be a garage but it has morphed into a secondary living space for overflow guests, parties, etc and I want to use an air conditioner in there. I also want to cover the inside of the walls with sheetrock and paneling. I’m not planning on using any batt insulation inside the wall cavity. It’s never used in the winter. Am I too worried about moisture (then mold) getting trapped between the sheetrock and the T111? Are there steps I should take differently to reduce the risk? Or do you suggest I insulate it? Thanks for your opinion.

Greg at http://www.timberframe1.com