I have a 20 yo home with a finished basement in upstate NY. Finished is drywall over metal studs. The walls are installed approx 10-12 inches off the concrete poured foundation. There is a drop ceiling. Before I add a heat source to the basement, I was considering insulating better. Currently there is insulation on the poured foundation down the frost line. The bottoms of the walls are uninsulated. I have been reading lots of comments regarding vapor barriers, etc. My options are to blow in (possibly pour in as there is access through drop ceiling) however would need to fill 10-12 inch gap. Other options include attempting to remove every other piece of drywall and place foam insulation onto concrete foundation and/or add fiberglass to studs. Not sure which method would be best in this situation. Any recommendations would be greatly appreciated.

Do you mean there is an air space of 10" between the studs and the concrete foundation walls? I think that much insulation would be overkill and even possibly detrimental to examining for cracks, bugs, mice, etc, and it's handy for adding plumbing and wiring. Heat loss starts very low at the bottom (around 5%) and increases up the wall, assuming the typical depth below ground. I would leave it all as is. I'm not even sure I would add a vapor barrier. Concrete is ~18% porous and you have nothing to rot with metal studs and that empty space. If you have seen no evidence of weeping or efflorescence or anything so far, I'd consider that the outside drainage and waterproofing are good, and the inside will be fine. If adding heat means potential moisture condensation between the wall and the concrete, and you see some evidence of it at the bottom of a wall later on, you can deal with it then. In fact having no insulation at the bottom of the wall sounds like a good idea to me so that you don't have possible condensation down there getting it soggy.

I forgot to add that since heat loss is highest at the top, you might consider insulating above the drop ceiling all around the edges, either fiberglas, or hire a spray foam contractor. A 20 year old house should have insulation there already though. Again, it's good to have access to joists, sills and plates (wood!) to examine them for rot, termites, etc. My 1967 house has quite a bit of both damage.