Dry walling a basement

[Sauerkraut57]

I would absolutely put up at least 2×4 walls (2×6 would be better), insulate the walls, and put up a vapor barrier. If there is a possibility of water in the basement, you may want to consider using a tile backer board on the lower part of the wall. This would save you from having to rip out all the drywall if water does get into the basement. I am getting ready to do some drywall work in my basement, and I do not have a water problem, but I am still going to use green board below the foundation line.