Thanks Joe & Kim,
I have been researching this and found that the best solution for reto insulating old walls is dense pack cellulose.
You are both right about the insulation getting wet, but tis is less of a problem from condensation than from leaks. I am minimizing condensation with all th appropriate techniques(exhaust fans, sealing crawl space floor etc.) The attic ois another issue and will be dealt with also.
Found a good resource http://www.weatherization,
this has some interesting stuff and the finehomebuilding anf old house journal webs are good too.