The rim joists are currently getting insulated and sealed and we are hoping to insulate the basement as well since this is where the ductwork is and our 1922 wood floors are so porous we’re heating the basement whether we like it or not…

1) Almost every rim joist detail diagram shows a mudsill resting on the foundation but it doesn’t reach the edge of the foundation or overlap and it looks like spray foam is then applied to the joist bay and over the top of the mudsill completely encapsulating the mudsill on the interior. 

Our  2×6 PT mudsill is flush with or even overlapping the foundation a little bit. I was going to use Prosoco Air and Weather barrier to seal the gap between mudsill and foundation but should I also be applying spray foam over this too for some reason?

2) And here is the tricky part:  As one can see by the attached images, we have an interior perimeter foundation for lack of a better description.  (Previous owner’s sinking house remedy.) I’m a bit stymied on how to insulate. 

I know we want a really good air barrier so that warm air doesn’t reach the cold foundation and inherent moisture in foundation doesn’t develop a condensation/mold problem.  But even if we install floor to ceiling rigid foam that is taped and sealed and air tight to the interior of the basement and there is no exterior air due to rim joist air sealing and insulation, there will still be some conditioned air leaking through the floor boards above this cavity.  Will that first-floor air seepage collect moisture in the “interior perimeter wall” cavity between the original foundation and rigid foam wall? 

Is insulating the basement impossible under these conditions or are there alternative suggestions?