I live in the Chicago area and I am finishing my basement. I did much research on the vapor barrier issue. I feel the proper way to insulate basements is to use the 1" - 2" pink board against foundation, then stud, batt insulate if desired, then rock... no vapor barrier. There are many opinions on this but I feel that you should not trap any water between the foundation and wall board if it does get wet. I have decided against using the pink board because of space and cost. I do not have any water issues or condensation issues at this time. However, I want to try to avoid any future problems as best as I can with what I have decided to go with. This is what I am doing / have done. Foundation wall sealed with waterproofing paint, 1/2 inch space between foundation walls and 16 O.C. studs, Kraft faced mold resistant insulation with a vapor retarder not barrier, then mold resistant sheet rock. My main question is whether I should seal the 1/2 inch gap between the top plate and the sill plate. If I do, it is basically going against my thinking that I would like an air gap between the foundation wall and studs just in case it ever did get wet or condensate without me knowing. However, if I do leave the gap open, will this allow warm air in to condensate against the cold wall? I will be insulating the areas above the sill and between the joists'. Any opinions or advice is much appreciates.