Advice needed with vapor barrier
am a bit at a loss and don’t want to screw up here. We live in zone 5. Just had new siding put on (Hardie) which included 1/4” foam board underneath (I understand this is more for leveling than a vapor barrier). My problem is now the basement. I am doing a quick Reno. I discovered that the original owner used insulation with a plastic vapor barrier behind d the drywall. I removed the old ceiling tiles which were foil backed along with Kraft backed insulation in the joists. My plan was to spray everything black and leave it open. I discovered some mold near an exterior wall around Kraft backed insulation. I am certain that the initial install by the previous owner was done wrong.
Take a look at pics. Orlando I properly insulate this? The area is about 2-3 feet above foundation. The current vapor barrier stops at the top of the drywall. There is a gap to the exterior framing then this is where Kraft backed was added (and mold appeared). How do I properly insulate this? Rockwool up to finished wall without foam board? Lay foam board horizontally up to vapor barrier? I feel if I add foam board it will trap moisture here actually. Worried about both the exterior framing to the foundation as well as the interior cavity.
Any advice appreciated. I’m conflicted!