You should correct the moisture problem before starting on the project. If the tile is secure, I would leave it in place.

As for the wall, you would have to cut back the drywall, frame around the foundation flare, and re-drywall. I'm imagining that when view on edge, the wall would look like a lower case "h".

The moisture problem is a "normal" amount of humidity from the concrete slab coming up. these older slabs did not have a poly sheet put under the slab at construction time and just have sand underneath. they also have no rebar in them at all. The rigid foam technique I am using is from Building Science and can manage that small natural amount. If the vinyl tile & glue was not there, the small amount of moisture might not even be noticed and the concrete would seem dry as it does in the rest of the garage.

The concrete footing:
not quite like an "h" bump out - the footing is trapezoidal in shape and flares out a bit more at the very bottom where it contacts the concrete floor.

I know about putting drywall on the outside of this footing - my interest is "how" have people in the past "attached" a covering to the concrete footing as it is concrete. You can't just glue the drywall on the outside of the concrete footing because then it will still look trapezoidal and they want the shape to look more like a boxed out rectangle.

I have a method in mind but it is tedious and I am looking for techniques as people must have houses like this and may have an easier technique. You can't box it the same way you box a soffit for a duct for example since it is concrete and trapazoidal. something needs to be put at the upper part of the footing to bring it out so a short straight vertical wall can be put in the front of the footing and a small say 6" level horizontal shelf on top of the footing to put things on. I might not even use drywall to cover the footing but a nice smooth grade plywood that we can paint white. the problem is how to box it out so it is not a trapezoid and how best to attach the plywood to the front face. The top face is easy - I could even just PL glue the top piece of plywood on.

Only thing I can think of is put a 2"x4" horizontally along the top front of the footing to shim it out. Add more furring strips if necessary to bump it out to match the bottom. Add one furring horizontally along the bottom front side. Use Tapcon screws to attach all of this wood to the concrete (tedious). Then once everything is leveled out - put a piece of plywood on the front and then a small piece on top to make a little shelf.

For the floor, leave out the sheeting under the XPS and remove the vinyl tiles.

Source: Building Science Corp.RR-0202

thanks for the advice all.

We pulled all the vinyl/linoleum squares up - very old & brittle so they came right off. They look like the commercial tiles used in hospital floors but smaller. There is a black color on the concrete - Since this was put down circa 1950, I am thinking the black was type of glue they used back then for linoleum tile (maybe it is roof adhesive back then). the black is all flat and thin so we see no need to remove this black - thin enough I can see the concrete through it in a lot of spots.

I will leave out the Poly sheet altogether.
We are following roughly a different guide from Building Science - as they don't want the hassle of installing a floor french drain as pictured about - and the floor is not wet ever - just normal wicking up of vapor from concrete.

another problem is I cut out all the drywall up 3" from the floor and I see the orginal 2"x4" redwood bottom plates are touching the concrete directly. they never used a Capillary break back then so wood touches concrete. can this be ignored or should I spray some green copper on them where I have access?

I think it would be advisable to make sure the black isn't mold. It sounds like it could be the glue, but it could be mold that likes the glue.

I highly doubt it is mold at this point because to be sure after the vinyl tile was removed that the floor was free of all mildew - we scrubbed/bleached the whole floor and the concrete footings and we cut the drywall walls up 3" and we sprayed the lower parts of all drywall with a bleach solution.

We heavily bleached and used scrub brushes on the entire floor at least 2 times. Then the floor was rinsed, vacuumed, swept and dried a couple times. If anything was there should be gone/dead. The black does not have the consistency of mold, but rather is stiffer and also it is sort of swirl shaped like a human used a toothed tool to spread it on.

Therefore, if anyone is old enough to know back in 1949-1950 - when they attached linoleum/vinyl tiles to concrete floors - did they use some kind of adhesive that was black like a roofing tar/adhesive? I know they didn't have Polyurethane adhesives like they do today. It really looks to me like they used a simple roofing tar based on the way it feels. It is hard/brittle - but very thin now since most of it came off with the Vinyl tiles. It was very brittle which was good because the entire room came off in 2 hours.

That black stuff is cutback adhesive, and may have contained asbestos. Also tiles were likely asbestos, too.

You had better think about that moisture. It's one thing to have dampness that can evaporate, and another to trap it underneath.

The solution in one house around me was to have a firm pump in some floor leveler that also was a moisture barrier. Afterward, they glued down hardwood (which was still not a good idea below grade, but surprisingly it's not buckling or anything after 5 years. (If they were to have a flood from a spring storm, all bet's would be off, of course.)

I don't see any science behind gluing wood floor directly to any concrete.

We are going to follow one of the proven methods studied and tested by Building Science where they do not recommend a barrier in this situation. This method allows the floor to breath. Their studies have shown that using an Epoxy paint, then Rigid Foam, then furring strips, then 2 layers of 1/2" OSB or one layer of 3/4" ply is good. The Epoxy paint is considered semi-permeable and allows the floor to still release vapor in a very slow controlled manner. See figure 2 I linked from the Science website.

The idea is they "want" the floor to be able to breathe in a slow controlled manner and do not want it sealed off since it is hard to get a 100% seal.

See their website, Figure 2 for wood floor install over concrete that is at grade or above grade. http://www.buildingscience.com/documents/insights/bsi-003-concrete-floor-problems/#Photo_07

They have done a lot of studies specifically to this problem.

Several companies like Barricade have even capitalized on their idea and made prefab rigid foam with OSB already attached but it cost a lot more for that then just doing your own Foam with OSB.

Here is Mike Holmes doing floor similar to what we are doing: http://www.youtube.com/watch?v=4jSuWbdJy5A&feature=g-vrec

Here is link to Barricade one of the companies that is making "quickie" rigid foam with OSB panels now: - a lot more costly than doing it yourself: http://www.ovrx.com/basement-flooring.html

Here is a link that might be useful: Building Science

Infer what you will. Do as you wish. Please be sure to update after a couple years.

As long as we're not talking about an active water leak, it sounds right to me. However, since you've gone this far, I would put an inch of XPS under those baseplates.

Too late now to take precautions with regard to the tiles and adhesive, which, as mentioned above, likely contained asbestos.